Jim and Jane are back at it again. Today we are talking about something that seems simple, but has become kind of complex lately, and that is “homeowners insurance”.

So as you all know, your payment includes your principal and interest, homeowners insurance, property taxes, and it can also include mortgage insurance, depending on how much you are putting down. But what we are discussing today is your “Homeowners Insurance” which is the insurance that would protect you in the case of a fire, tornado, or a major loss. It’s not like back in the old days, when your parents filed a claim on your homeowners insurance because the neighborhood kid threw a ball at the front window. Not any more.

Why is it so important? It is included into your payments which means that it is included in your debt-to-income ratio, and we don’t know how much to quote. We don’t know how much to guess, which we can’t guess any more, really. We used to quote people $55 per month, which always seemed to be accurate, and then we went to $75 per month, $90 per month, and now we are quoting people $100-$200 per month. Jim has received quotes for $3,600 for the premium for the whole year, which is $300 per month. And if Jane and Jim are approving people up to their max, and we are using, less say, $150 per month, as estimated homeowners insurance, and the policy comes in so much more, you may not qualify for the loan.

Jane is a licensed insurance agent, which makes our team stronger, and has bailed all of our team out on numerous occasions when people’s insurance is too high. It’s great to have someone in our office that knows a lot about your homeowners insurance.

What is driving up homeowners insurance these days? CLAIMS.
Claims and natural disasters are what is driving up insurance costs. Because all of the insurance carriers, have depleted their surplus. Which means if they have to pay out more claims there is no money there, because of all the natural disasters that they haven’t counted on. Jim’s sister is also an insurance agent, and she said that they are paying out $1.37 for every dollar that they bring in, that goes into the bucket for storms, hail damage, etc. That is what is driving it up.

Roofs. Roofs are very important and some carriers won’t even take you if your roof is older than 15 years. And a lot of seller’s disclosures, they don’t know how old it is, but then you are probably able to find out through the village for the last building permit that was pulled for the roof. It is something that everyone needs to be aware of, and it is very important to know when the roof was last done. If it is too old, some carriers will put you on a “roof payment schedule” which means that they will not cover your roof 100%, they may only cover it 70%, 60%.

The age of the home can play a big role, as well as any past claims that you had claimed on your previous home(s). That could be an effect.

Open claims on a house, that someone is trying to buy. Jim has had a couple of situations when someone was starting to file a claim, and then they found out that they weren’t going to get enough money, but the claim was still filed. So if you have that happen to you, make sure you file with your insurance agent that you are not going to accept the claim, to get that off the books. A lot of insurance agencies leave claims open for a long time, depending on what they are.

The biggest issue that we have with pre-approving people, is not knowing exactly how much the homeowners insurance is, and all we can do is guess on the higher side. Jim has had other people call him, saying “Jim you have a better interest rate, but my payment is still lower with someone else”. Which doesn’t make sense. We can all look up the rates, mortgage insurance and property taxes, so how is it that we offer a lower rate, someone else has a lower monthly payment. Typically when Jim sees a breakdown of the payment, they are using $50 per month for homeowners insurance, and no one offers that.

So you have to be careful, and Jim has even had buyers say that “insurance through Real Estate Home Loans, is too high” and as Jim explains to them, that is just the guess for homeowners insurance. Jim quotes it high to try to protect you, and not trying to sell you a higher insurance. We only want the proper coverage for you.

Your agent should be building your insurance policy, with your specs on your home that you are buying. If you have an agent that you are working with currently, you should get a quote from your current agent, because that will give you a “Multi-Policy Discount” saving you tons of money. Make sure you work on getting your insurance bundled. We do not pick your insurance company, and we can recommend you to an insurance agent, and your real estate agent might even be able to refer you to someone.

Today is not the day to put that on the back burner, and our pre-approval letters that we have been sending out, state that we are suggesting that the homebuyer goes and shops for insurance, right away. Your contract tells you that you have “X amount of time to get your own insurance” but sometimes buyers drag their feet on it. We’ve had insurance agencies that have given coverage on a house, after the closing. They inspect the house, and then they want to drop or raise the insurance, because the square footage is wrong, or they added more things that the agent didn’t put in. Sometimes they will fly drones over a house to look at the roofs.

The buyers pick the homeowners insurance, and for those that are still living at home, maybe you should ask your parent’s who they use.

Escrow and Non-Escrow. * Some loans depending on the downpayment, will allow you to NOT escrow, which means that you can just pay your own homeowners insurance every year, and you can pay your own taxes every year. But we (Real Estate Resource Home Loans) still need to calculate that into your debt-to-income ratio.

Some times Jim has customers ask “why do I have to pay for a year’s worth of insurance, at the closing but you still collect it in my monthly payment, I feel like I am paying twice for it”. This means that you are actually starting the coverage the day that you enter your home. Example: if you are closing “November 7” your insurance policy will cover you from Nov 7, 2025 all the way through Nov 7, 2026. And then on Nov 7, 2026, there will be a new full year policy due, and they have been collecting that from a monthly basis with an escrow account. When the bill comes due, it will already be in your escrow.

Just because you “escrow” doesn’t mean that you should be in-tune with your insurance and tax bills. You need to compare what the policies are from the past year.

Make sure to look at your “escrow analysis statement” so that we can look at it. If the average person that tries to look at it, it is very tough to understand.

You maybe be looking for houses, there might be a “senior exemption” on the current owner, and don’t be afraid of those houses with the current taxes, because those people might not have any exemptions. And when you buy the house, you can get different exemptions. Some times you can get a good deal on a house that doesn’t have exemptions, because the taxes appear high and it scares away a lot of buyers. But you can buy that house, file your exemptions and drop those taxes.

You a give us a call and we can look up the property taxes, to see what the taxes are with exemptions and without. Give you some idea on what the taxes would be for you. If you don’t understand your coverage, ask your agent to explain that to you. Deductibles are important to you.

A home owners insurance policy, is not a maintenance property for you home. You still have to maintain your home. Fix the furnace, take care of any plumbing, there are certain things that are not covered on your policy. If you would like to have some other things covered in your home that aren’t covered in your insurance, you might want to look into a “home warranty” with your real estate agent. Jim sees a lot of “water/sewer backup” in the insurance policies and if water is leaking in because of a crack in foundation, they will cover for the contents, but they will not cover to repair the crack, because that is maintenance. Understand what your policy covers.

Remember that we work for you. Ask questions.

If you have any questions, would like some help understand your homeowners insurance, or would like to be on our show, make sure to contact us today: https://rrhomeloans.com/