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.
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.
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?
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.