How does home insurance work with a mortgage? You may be confused with all the financial jargon that lenders tell you, so allow us to help you simplify the terms. Let us focus on home insurance and mortgage insurance. They may sound the same, but those two are different.
What is a homeowner’s insurance?
So that you are not confused, a Homeowner’s insurance is your protection if something happens to your home or your belonging is some unfortunate event happens. Think about hurricanes, fire, natural disasters, and the likes. If anything happens to our property because of these, then you can file a claim for it.
The standard homeowner’s insurance may not protect you from floods and earthquakes, so if you want those included, you may have to get additional coverage for it. Again, depending on your insurance coverage inclusions, some of your belongings can be covered against theft and loss. It can also include the medical costs and legal fees if somebody gets hurt accidentally whilst inside your property.
What is mortgage insurance?
On the other hand, mortgage insurance protects the lender from financial loss if you, as the borrower, cannot fulfill your obligations. So when this time comes, the mortgage insurer will guarantee that your mortgage gets paid and the lender does not lose their money.
So when does one pay for mortgage insurance? If you can’t afford to come up with at least a 20% downpayment for your home, be prepared to pay for mortgage insurance premiums during the closing, or the premiums can also be included in your monthly mortgage payments. You can usually find this when you apply for FHA loans, conventional loans, VA loans, and USDA loans.
If you need to know more about this and how you can maximize your resources by not paying for mortgage insurance, let us know, and we would gladly present you with the best options possible.