Many first-time buyers get confused about the types of insurance required when buying a home. In fact, many first-time homebuyers have to obtain three or even four types of insurance.
The first type of insurance needed is Homeowners Insurance. Also called property insurance or hazard insurance, this insurance protects you and the lender in case of fire or other forms of damage to the property. This insurance is normally paid as part of your mortgage payment. Additionally, if your home is in a flood zone or is later declared to be in a flood zone, you will be required to get a Flood Insurance policy as well.
The second type of insurance that may be needed is Private Mortgage Insurance (PMI). Also called just mortgage insurance or mortgage insurance premium (MIP), this insurance protects the lender against you in case you default. It is paid monthly as part of your mortgage payment and normally is required when you are borrowing more than 80% of the value of the home. However, there are some loan programs that will charge a higher rate and eliminate the PMI payment. These loans offer more of a tax write-off since mortgage insurance is not tax-deductible. Depending on the appreciation rate of homes in the area in which you are buying and depending on how long you stay in the property, this may or may not be a good idea.
The last type of insurance that all homebuyers need whether or not you are a first-time homebuyer is Title Insurance. This insurance protects you against anyone alleging a claim, lien or encumbrance against your home before you purchased it. It is not a requirement, but you should purchase it because you never know what could have happened to the property before you purchased it. It is a one-time fee paid at closing and costs around $100 to $300. The real protection it provides is when you are going to sell your home and your title is checked. If any problems pop up (they sometimes do), the Title Insurance Company will be financially responsible for clearing any "clouds" on title BEFORE you owned the property. Any "clouds" you create, (i.e. liens, refinances, quick claim deeds) are your responsibility.
A-HOUSE stands ready to serve all of your mortgage and real estate needs. We are educators, originators and buyers' agents focused on getting the most out of home ownership for buyers. If you want to purchase or refinance a home, please give us an opportunity to serve your needs by applying online at www.ahousebuyer.com. We will walk with you through the homebuying process from start to finish. Join our alliance and achieve the American dream - home ownership!
Steven Holland
President
A-HOUSE Program Alliance, Inc.
(404) 872-3396, ext. 204
(404) 876-9087 Fax
P.O. Box 50451
Atlanta, GA 30302 shollandahousebuyer.comwww.ahousebuyer.com
Georgia Residential Mortgage Licensee
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