Got a FHA loan. Q about Taxes and Insurance?

Question

Our mortgage lender says the taxes and insurance are included in our loan. My realtor is gone on vacation. the other realtor in the office said we had to get insurance on the home before closing. Does my FHA loan cover all my insurance? the realtor said i need to get hazard insurance. Why would i need 2 insurances. She also said the insurance from our lender was title insurance...were 1st time buyers and im confussed. Does anyone know about FHA insurance and what kind of insurance i will have with them...our good faith says flood, hazard, etc. the realtor said oh that just means they are going to check to see if its in a flood area...I wish my realtor was here, but who is right...i dont wanna pay an insurance co if i already have it...can someone explain this to me...thanks

ok say the roof falls in..will we get the money from the insurance to fix it, or do they get the money if its in there name...

Answer 1

I can answer this question very clearly for you. I have done many FHA loans over the years. You are talking about 2 different insurances. The FHA insurance is insurance that covers the lender in case you default on your loan. It has nothing to do with protection for the home. FHA requires that you have this insurance, the only way around it is if you take a term for less than 15 years and have at least 20% down. The other insurance is homeowners insurance, which covers the home itself. You will have to get this as well or a lender will not give you a loan. The premium for the year is collected prior to closing. Your realtor was right in regards to the good faith estimate. All that is is to check if the home is located in a flood zone, if so, you will need to purchase flood insurance as well. If you need any other clarifications, feel free to email me. I don't know who your mortgage consultant is, but he/she should be explaining this to you!

Answer 2

You have to select the insurance coverage. Before closing, the lender will want to see a "binder" that shows them how much the coverage is, and that the lender is named as an insured (if the house burns down, their name will be on the check, too, so they aren't left with a 200,000 mortgage on a burned out lot). They probably also want a year paid before closing, although sometimes they allow that to be paid AT closing.

After closing, you will make a payment that is the total of the monthly principal and interest for the loan, plus 1/12 of the annual taxes, plus 1/12 of the annual insurance. These two extra amounts go into a special account for you, an "escrow". The lender will make the tax and insurance payments from that. If either goes up, you will have to pay more. When the loan is fully paid, you get whatever is left in that account.

You are not paying it twice.

Answer 3

Once you do have a hazard policy in place (the one with the annual premiums paid by your lender) and the roof falls in the insurance company pays your lender who will then pay you once the work to repair the property is complete. Your lender will often give you some of the claim money up front (typically 20%) to get the work started and then pay you the remaining when its complete. Also, Flood insurance is separate from hazard. Your title company/lender will tell you if you are in a flood zone and required to have flood insurance.

Answer 4

You will need FHA insurance which covers you if you default on your loan & home insurance to cover the home itself. You may want to try a website that compares multiple companies at once to get you the best price. I am paying less than ½ after I did.

Go to: http://www.insureme.com/landing.aspx?Refby=616162&Type=home

Take care,
Casey