04-22-2010 07:15 PM - edited 04-22-2010 07:25 PM
I was just approved for a jumbo FHA loan on a single family house for $625K. The mortgage commitment letter states I need homeowner's/hazard insurance that covers 100% of the unpaid mortgage.
I was shopping for quotes and when I went to USAA's website and put in the loan amount they automatically divvied up coverage into 'Dwelling" and "Other Structures". That division was $500K and $125K which of course equals the total amount of the loan.
Does this division between "Dwelling" and "Other Striuctures" (defined as structures include fences, driveways, sidewalks and buildings not attached to the home) satisfy FHA requirements or does FHA want my dwelling coverage to equal $625K? There isn't $125K worth of anything on the property and it seems silly to insure the land that is over priced due to location and which will still be there if the house burns down.
The "Indicated Value by Cost Approach" on the appraisal is: $300K
Any help would be appreciated.
04-23-2010 05:53 AM
I am an insurance agent, every Homeowner's policy I have ever written, the bank wants to protect their investment in the house itself. Every HO policy has a percentage that covers "other structures" based on the home coverage. I believe FHA is looking at having the house itself covered for that much. Do you have a local insurance agent? I highly recommend getting one in your area. That person will make sure you are properly covered.
04-23-2010 07:32 AM
Question along this line I was told by an insurance broker that you are required to insure the replacement value of the home. For one insurance company they wanted me to take out insurance of 250K on a 133K property that was appraised at 145K.
So do you insurance loan value or replacement cost?
04-23-2010 08:18 AM
The lender is going to want it insured for AT LEAST Loan amount. But you definately would want to insure the home for replacement cost. You don't go off of appraisals. Insurance companies have a program they use to come up with the replacement value. I would review the replacement estimate with your insurance agent. Your agent should do that anyway.
IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions based on Experian or Equifax data (additional FICO® Score versions based on TransUnion data are not currently available on myFICO.com). Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more
FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.