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After we've closed and funded Loan Officer wants lower HOI deductible?

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Anonymous
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After we've closed and funded Loan Officer wants lower HOI deductible?

I received an email from my loan officer today at Colonial Savings stating:

 

"US Bank (who will service your mortgage) is not accepting the deductible on
your homeowners insurance.  They require that the deductible can't exceed
1% of the policy:

Homeowner's Insurance Policy provided for file shows deductible as $2500.
 Deductible cannot be higher than $1000 or 1% of the face amount of the
policy and $2500 exceeds both of these amounts.  Please provide a
Homeowners Policy with deductible corrected and if it results in an increase of
the yearly premium, we will also need proof of the additional premium paid
along with a new Payment Letter."

 

I don't like the idea of paying the difference out of pocket for a different premium than what was previously agreed to and was accepted by our loan provider. Am I obligated to follow through?

 

Thanks,

 

Shawn

Message 1 of 10
9 REPLIES 9
pdog661
Frequent Contributor

Re: After we've closed and funded Loan Officer wants lower HOI deductible?

What mortgage type?

 

FHA?  I believe the max deductable is 1K. 

Message 2 of 10
StartingOver10
Moderator Emerita

Re: After we've closed and funded Loan Officer wants lower HOI deductible?


@Anonymous wrote:

I received an email from my loan officer today at Colonial Savings stating:

 

"US Bank (who will service your mortgage) is not accepting the deductible on
your homeowners insurance.  They require that the deductible can't exceed
1% of the policy:

Homeowner's Insurance Policy provided for file shows deductible as $2500.
 Deductible cannot be higher than $1000 or 1% of the face amount of the
policy and $2500 exceeds both of these amounts.  Please provide a
Homeowners Policy with deductible corrected and if it results in an increase of
the yearly premium, we will also need proof of the additional premium paid
along with a new Payment Letter."

 

I don't like the idea of paying the difference out of pocket for a different premium than what was previously agreed to and was accepted by our loan provider. Am I obligated to follow through?

 

Thanks,

 

Shawn


Short answer:  Yes, you are obligated to follow through.

Longer answer: read your note and your mortgage (two different documents). If your insurance doesn't comply, it is considered a default on the loan. I know it can seem strange, but what the lender is doing is protecting the collateral by making sure the insurance is adequate.  

 

You can also shop your insurance, even if you have escrows set up with the lender. You choose the vendor under the terms required by the mortgage.

Message 3 of 10
MovingForward_2012
Valued Contributor

Re: After we've closed and funded Loan Officer wants lower HOI deductible?

My deductible is $1,000 but my LO knew that was required for FHA. My monthly payment for it is $48 per month and is escrowed. The payment is so low because I went through an insurance co. that only insures new construction homes. Is your home a new construction?

It is similar to a car loan. Most auto loan companies require $500 deductibles on Comp/Coll. Leases require on top of that $300K limits for bodily injury.

If you don't get a new policy with a lower deductible within the timeframe stated, they can buy it for you and if they do it, it will be way more expensive and be rolled into your monthly payment. You don't want that.

They want to make sure that if something happens over $1,000, that you will be able to afford your deductible so that the problem will be taken care of promptly and not delayed or ignored because the deductible is too high. Do you really want to come out of pocket with $2500 for $10,000 in repairs or $1,000? Don't say that it will never happen to you because even a hail storm can severely damage the roof and require new roofing.
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Message 4 of 10
JM-AM
Valued Contributor

Re: After we've closed and funded Loan Officer wants lower HOI deductible?

Home Owners Insurance really isnt that expensive in my opinion. Now if you have major claims or live in a flood area, or something of that nature it does add to your premium.

Shop around and get a decent quote with a 1K deductible, I dont thing it will be a major increase from what you are paying now.

As mentioned yes you will have to get a new policy.

Movingfoward example of her Insurance is a decent guideline for cost for her home value.
Good Luck
May all your dreams and wishes become a reality!
Message 5 of 10
StartingOver10
Moderator Emerita

Re: After we've closed and funded Loan Officer wants lower HOI deductible?


@JM-AM wrote:
Home Owners Insurance really isnt that expensive in my opinion. Now if you have major claims or live in a flood area, or something of that nature it does add to your premium.

Shop around and get a decent quote with a 1K deductible, I dont thing it will be a major increase from what you are paying now.

As mentioned yes you will have to get a new policy.

Movingfoward example of her Insurance is a decent guideline for cost for her home value.

It is very expensive in my area.   Here in Florida it is very expensive. In fact, the average premium if you have a new home and live west of I-95 and have all the items to reduce costs like hurricane shutters etc - you can expect to pay $2000 to $2500 per year. For older homes it is more than double that amount and of course if you have an expensive home the price can be much, much more (these are for small, CBS type homes less than $250k). (These prices are not for forced placed insurance, which is substantially higher) 

So anywhere else, the homeowners insurance is not really a factor - here in in S Fl it is a huge factor so we shop our policies here. OP didn't say where he/she is so I *assume* they aren't paying S Fl rates.

Message 6 of 10
JM-AM
Valued Contributor

Re: After we've closed and funded Loan Officer wants lower HOI deductible?

Well thats part of the consideration because of weather issues.

So I agree with you it is dependent on area as well.

Good Luck
May all your dreams and wishes become a reality!
Message 7 of 10
Amythyst
Contributor

Re: After we've closed and funded Loan Officer wants lower HOI deductible?

We have a big beautiful red fire hydrant right at the edge of our property line and I was told this is super groovy for insurance rates... lol.

Message 8 of 10
JM-AM
Valued Contributor

Re: After we've closed and funded Loan Officer wants lower HOI deductible?

Closer to hydrant and firehouse is always a little savings.

Smiley Happy
Good Luck
May all your dreams and wishes become a reality!
Message 9 of 10
DallasLoanGuy
Super Contributor

Re: After we've closed and funded Loan Officer wants lower HOI deductible?

the insurance companies know these things.... like how far is the fire station.

 

 

Retired Lender
Message 10 of 10
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