Category: Insurance & Taxes

If I’m super careful, do I really need homeowner’s insurance?

Yes. Even if you’re super-duper careful, homeowner’s insurance (which is a type of property insurance) is required. At the very least, you’ll need a policy to cover the remaining principal on your loan/or loan balance. We recommend speaking to your insurance agent to make sure you get the coverage that’s right for you.

Can I pay my own insurance?

In most cases, yes. However, if you have a government loan, your insurance premium must be collected and paid through an escrow account from your lender. Again, we recommend speaking to your insurance agent to make sure you have the coverage best suited for you.

Do I have any choice in the matter?

Of course. You can choose your own insurance carrier. We’ll work with you to make sure they meet certain requirements and they’re providing you with the proper coverage.

What if 15 minutes really can save me 15%?

You can change your insurance carrier at any time? Please notify us by sending a copy of the front page(s) of your new insurance policy. Make sure the page(s) include the insured’s name, address, policy period, location of premises, policy limits, and any other key information.

Types of Insurance

Homeowner’s insurance

Homeowner’s insurance is a type of property insurance. It protects you in the event that your home or belongings are damaged, stolen, or destroyed.

Flood Insurance

Depending on your property’s location, you may need to carry flood insurance. This is determined at the time of loan closing. Flood policies generally need to meet the lower of the following: The full replacement cost of the dwelling and insurable improvements made to it, or the maximum allowed through the National Flood Insurance Program, which is $250,000.

Windstorm/Hurricane Insurance

If you live in a high-risk coastal state, or Hawaii, you may be required to have separate windstorm/hurricane insurance.

Contents insurance 

This covers your personal possessions—for example, furniture, electronics, clothes, etc. While it’s not required, it’s a good idea to have contents insurance just in case the unexpected happens—for example a home burglary or fire. This type of insurance is optional and not included in your payments for your escrow account.

Homeowner Association (HOA) Insurance

If you live in a townhouse, condominium, or other residential area that requires you to pay a homeowner’s association (HOA) fee, you may also be required to purchase extra insurance related to your HOA. In most instances, your insurance fees will be included in your monthly HOA fees. It’s important to note that these policies will likely have restrictions, and you may want to consider additional coverage for items not covered in you HOA policy.

 

Subsidence Insurance

“Subsidence” is the collapse of land or loss of property due to the sinking of a man-made mine. If you live near an old coal mine, your home is required to have subsidence insurance. If you live in such an area, usually, this coverage is added automatically. If you’re not sure if you need this coverage, call your insurer and they should be able to help you.

Hazard Insurance

If your homeowner’s insurance coverage has lapsed or if we’ve been notified of a policy cancelation, we are required to obtain hazard insurance coverage on your behalf. Often this coverage is more expensive than the coverage you are able to purchase on your own. In addition, it only covers the structure. Your personal property is not included in such coverage. Hazard insurance will always be paid out of escrow The best way to keep this from happening is to make sure your premiums are paid on time and your policies are timely renewed. The great news is that we always send a reminder if your policy is about to expire.

You’re not. It’s some of that mortgage mumbo jumbo stuff we were talking about earlier and we will walk you through it step by step if that’s what it takes. Basically, it has to do with your federal income tax report. Here are the basics:

 

There are four types of IRS 1098 forms, including one that tells you how much you’ve paid in mortgage interest in the past year. The other forms are used to report charitable donations, tuition expenses, and student loan interest. You’ll receive your 1098 forms in the mail around tax time and use them to prepare your taxes.

A standard Form 1098, or “Mortgage Interest Statement”, is used to report mortgage interest of $600 or more paid to a lender for a mortgage. It will tell you the amount you’ve paid in interest over the past year.

 

All Form 1098s for the previous year are mailed by January 31st.

 

Simple FYI: For federal income tax purposes, a mortgage is a loan secured by your main home or second home. It includes, but is not limited to, first and second mortgages, home equity loans, and refinanced mortgages. Consult your tax advisor to learn more about your ability to deduct the interest you have paid to reduce your taxes.

That’s something completely different and personally not our cup of tea. However, escrow is something to savor. Simply put, an escrow account is like a separate side account that’s there to cover your property taxes and/or your homeowner’s insurance. Think of it as a little stash of money that we safely tuck away for you to pay for property taxes and homeowner’s insurance.

 

Your yearly escrow physical.

It’s like a little check-up from the mortgage doctor. Once a year, your loan servicer reviews your escrow account to make sure that it’s in healthy shape for the upcoming year. In other words, making sure you have enough in your account to pay for your property taxes and/or your homeowner’s insurance.

 

Simple FYI: Your escrow, taxes and insurance rates are not determined or controlled by us in any way shape or form. The amounts are determined by your local tax authority and your insurance company. On top of that there are specific limitations and requirements set by the US government around your escrow account balance to protect you. We don’t make the rules, but we’ll do everything in our power to help you understand how these aspects of your mortgage work.

 

It’s just like Monopoly.

You have to pay taxes on your property. An escrow account takes care of this for you and makes paying your property taxes totally simple. You won’t get $200 every time you pass go but you won’t wind up in jail either.

 

Insurance Insurance

The biggest advantage to having an escrow account is that your homeowner’s insurance is included in your monthly mortgage billing statement—making payments easier to manage and insuring your insurance is always up to date.

 

What happens if my escrow account comes up a few shingles short of a roof?

First of all, don’t freak out. Under certain conditions this can happen occasionally. On the flipside you can also wind up with an overage in your escrow account. In most cases you will be given options for example:

Option 1, Pay shortage in full or

Option 2, Make a partial payment towards shortage.

If you do not choose Option 1 or Option 2, the shortage will be automatically spread over 12 months.

 

You mentioned something about an overage in my escrow account?

Yes, under certain conditions your annual insurance premium, taxes (or both) come out less than originally expected. That leaves you with an overage in your account. You’ll receive a check for this overage. Take a look at the escrow analysis statement included with the check—it will show you how the overage was calculated. Then go get yourself something nice. You deserve it.