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Homeowners Insurance and Closing Costs

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Boldilocks
Established Contributor

Homeowners Insurance and Closing Costs

We just got the clear to close yesterday and were told that we needed a homeowners insurance binder and receipt that the policy has been paid.

 

Just a stupid question - it was included with the closing costs on the GFE.  When we go ahead and pay it prior to closing it is deducted from the closing costs, right? 

 

Our closing costs and prepaids are going to be crazy high - every litle bit helps (total $12,000 before deductions and credits on a $124,000 house).

______________________________________________________
DH starting scores 02/10/09: EX - 543, EQ - 543, TU - 554
Current scores: EQ - 750, TU - 732
My starting scores 03/13/10: EX - 711 (LO pull), EQ - 692, TU 701
Current scores: EQ 736, TU - 732
Message 1 of 7
6 REPLIES 6
MrChairman
Established Contributor

Re: Homeowners Insurance and Closing Costs

Boldi,

 

On your final HUD-1 which you most likely won't see until the day before or when you're sitting down at the closing table, the insurance amount will be deducted if you prepay. In my case, I just called up the insurance company and got the policy active. My bank then forwarded the money over to them and it was still included in the closing costs.


Starting Score:TransUnion: 698 (12 FEB 2010), Equifax: 674 (12 FEB 2010)
Current Score (Lender Pulled):TransUnion: 684 (12 SEP 2016), Equifax: 696 (12 SEP 2016), Experian: 679 (12 SEP 2016)
Goal Score:All scores All scores at least 700+ by December 2017!!

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Message 2 of 7
DallasLoanGuy
Super Contributor

Re: Homeowners Insurance and Closing Costs


@Boldilocks wrote:

We just got the clear to close yesterday and were told that we needed a homeowners insurance binder and receipt that the policy has been paid.  did the lender explain why the title company cant pay for the policy after funding?

 

Just a stupid question - it was included with the closing costs on the GFE.  When we go ahead and pay it prior to closing it is deducted from the closing costs, right?  of course

 

Our closing costs and prepaids are going to be crazy high - every litle bit helps (total $12,000 before deductions and credits on a $124,000 house).


 

 

Retired Lender
Message 3 of 7
Walt_K
Senior Contributor

Re: Homeowners Insurance and Closing Costs

IIRC, there could be an issue with the fact that it is prepaid if you are getting lender/seller credits that exceed your closing costs.  I can't remember the mechanics of it, but it came up for me when we closed because my credits exceeded costs and FHA doesn't count items that have been prepaid or something like that.  We ended up working it all out, but it is something to look into if you are getting a lot of credits.


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Message 4 of 7
Boldilocks
Established Contributor

Re: Homeowners Insurance and Closing Costs


@Walt_K wrote:

IIRC, there could be an issue with the fact that it is prepaid if you are getting lender/seller credits that exceed your closing costs.  I can't remember the mechanics of it, but it came up for me when we closed because my credits exceeded costs and FHA doesn't count items that have been prepaid or something like that.  We ended up working it all out, but it is something to look into if you are getting a lot of credits.


Good to know - we are definitely not getting a lot of credits and needed to show $6500 in our account to bring around that amount to closing.

 

______________________________________________________
DH starting scores 02/10/09: EX - 543, EQ - 543, TU - 554
Current scores: EQ - 750, TU - 732
My starting scores 03/13/10: EX - 711 (LO pull), EQ - 692, TU 701
Current scores: EQ 736, TU - 732
Message 5 of 7
DallasLoanGuy
Super Contributor

Re: Homeowners Insurance and Closing Costs


@Walt_K wrote:

IIRC, there could be an issue with the fact that it is prepaid if you are getting lender/seller credits that exceed your closing costs.  I can't remember the mechanics of it, but it came up for me when we closed because my credits exceeded costs and FHA doesn't count items that have been prepaid or something like that.  We ended up working it all out, but it is something to look into if you are getting a lot of credits.


 

your lender was wrong.

you could have gotten it back.

 

it would be treated like earnest money. you can actually get cash back at closing.... if it is YOUR verified cash already in the transaction.

 

 

 

Retired Lender
Message 6 of 7
Walt_K
Senior Contributor

Re: Homeowners Insurance and Closing Costs


@DallasLoanGuy wrote:

@Walt_K wrote:

IIRC, there could be an issue with the fact that it is prepaid if you are getting lender/seller credits that exceed your closing costs.  I can't remember the mechanics of it, but it came up for me when we closed because my credits exceeded costs and FHA doesn't count items that have been prepaid or something like that.  We ended up working it all out, but it is something to look into if you are getting a lot of credits.


 

your lender was wrong.

you could have gotten it back.

 

it would be treated like earnest money. you can actually get cash back at closing.... if it is YOUR verified cash already in the transaction.

 

 

 


The issue was that the contract provided for excess credit to go back to the seller.  In any event, I did get it all because they put the items I prepaid back on the HUD so they were paid at closing and then the insurance company, home inspector, etc. gave me a refund when they received a second payment from the title company at closing.  But for future reference, if I go through that again, I'll make sure to research a little further to possibly avoid all the jockeying at the end.


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


Take the FICO Fitness Challenge
Message 7 of 7
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