When should a home buyer obtain a home insurance quote once their offer has been accepted? Should it be right away, before the inspection, after the inspection, or before closing? What started me thinking about this was a new home buyer seminar I was invited to speak at by my friend and local Keller Williams realtor, Jana Kading. Over the next 3 posts, we’ll look at a that address 3 home insurance issues home buyers need to address.
I believe all home buyers, whether they’re buying their first home or their tenth should obtain a home insurance quote once their offer has been accepted. There are two reasons why this should be done at this point, before the option period expires including knowing what’s on the CLUE report and having a firm insurance cost on the new home.
CLUE Report: CLUE is the abbreviation for Comprehensive Loss Underwriting Exchange. This is the clearing house all insurance companies report claims to. In other words, this report shows two kinds of claims – those filed by the home buyer and those filed by the home seller for the past 3 to 5 years.
The reason it’s important to review the CLUE report is that any claims filed have the potential to impact the cost for the home insurance policy. Some companies only look at prior claims filed by the home buyer, while a few count claims filed by both the buyer and the seller. If the CLUE report has not been run, then the quote you’ve received does not have a “hard” or final cost. Most carriers will not produce a final rate until the CLUE report has been run and prior claims have been accounted for.
In addition, most buyers will want to know if the seller has filed any claims in the past few years and what they were for. Even if the carrier doesn’t count them toward the rate, their underwriters want to know what caused the claim and what repairs were performed for a water leak, hail, or some other type of claim.
Insurance Cost: One of the factors all mortgage loan originators evaluate to approve a home loan is the debt to income, or DTI, ratio. The DTI ratio demonstrates the home buyer has the cash flow to pay both their current debts (car payment, credit cards, etc.), as well as their mortgage payment. Having a hard or final home insurance claim that takes everything into consideration helps everyone confirm the DTI ratios are within their underwriting guidelines.
No one wants the home insurance policy cost to keep a buyer from buying a home. This is especially important now when rates have risen sharply for many Texans due to home insurance claims filed for recent hail storms and hurricanes.
Having this information before the option period ends is very helpful and ensures a smoother home buying process. What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!