It can be difficult to get familiar with all aspects of buying a house. It can be difficult to keep up with all the new terminology and the many closing costs.
You may have many questions if you are a first-time homeowner. Are you aware of the amount due on your homeowners’ insurance premium at closing? Do you know how much? A mortgage calculator that includes PMI, taxes and insurance can be used to get the answers you are looking for. However, most of these numbers will not work after closing.
To help you navigate your way through the finances of the closing process, we’ve got some helpful homeowners insurance closing details to share with you. We will discuss what to expect at closing and how you can pay your homeowners insurance premium. You can, for example, pay your premium in advance and offset the amount due at the time you sign the contract.
Are Closing Costs Included in Homeowners Insurance?
Each deal is unique so it is difficult to give a definitive answer about whether homeowners insurance is included in closing fees. They may be paid at closing in some cases and included in the “cash to close” statement by the lender.
Buyers may try to get the seller to cover their premium or other closing expenses. These expenses may be included in closing costs but they can be shifted to the buyer.
If you don’t have cash to purchase a home, your lender may require that you pay one-year’s homeowners insurance premium before or at closing.
Prepaid costs such as your homeowners premium, although they are paid at the same moment as closing costs, are not the same. Some lenders will require that these fees be deposited into a specific “prepaid escrow account,” which is different than the escrow accounts that distribute funds between the buyer and seller.
What is the Homeowners Insurance Premium Cost?
It’s important to have an accurate idea of how much you can expect to pay for your premium. A home insurance binder to close for one year will cost you around $1,200 for a $200,000 house. But like other insurance products, depending on the deductible you select and the amount of coverage you take on, the amount due on your premium depends on the coverage you choose.
American Family is dedicated to helping you get an easy-to-understand homeowners insurance policy that meets your needs and budget. And the good news is that we also offer a variety of ways to save on a home insurance premium.
About Homeowners insurance premiums and closing costs
The prepaid costs section of your closing costs will usually include your homeowners insurance payment. Although not directly related to the home purchase, prepaid items are often required by the group financing the loan and must be paid in advance.
You will likely find an additional prepaid line item if you pay less than 20% down payment: your private mortgage premium (PMI). You may need to have additional insurance depending on where you live to allow underwriting to approve your loan.
Prepaid costs are generally consistent, regardless of which lender you choose. Below is a list of prepaid items you will find in your lender’s “cash to close” statement, along with their average cost.
When choosing a homeowners policy there are many things to take into consideration, not to mention the expenses that will be incurred at closing. You may be able convince the seller to pay some of your pre-paid fees in a buyer’s market with limited inventory. Ask your agent how they approach selling concessions as you build your offer to buy. It’s possible that you will be pleasantly surprised!
As you consider your closing cost finances while shopping for homes, remember to check in early with your American Family Insurance agent. They will help you find the best coverage for your new house and will also work with you to make sure you fully understand how the insurance that you have chosen protects your large investment.