Kentucky's median home value is $146,000, and in Hopkinsville, the median listing price is $149,900, with median sales falling at $94,300. However, it's important to note that homes are investments. When you buy a house, you are going to spend money on it, and you will continue to do so over the years.
But it's not just you who will make this investment. It might also be the investment of a mortgage lender. Since these parties have a stake in your home, they might require you to get homeowners insurance. Here's what you can expect if you face this requirement.
Why Lenders Require Homeowners Insurance
A mortgage is a mechanism that helps millions of Americans afford to buy homes. By taking out the loan with a bank or other lender, buyers agree to pay off the value of that home over time. There is currently more than $10 trillion in mortgage debt in the United States, and the average new mortgage cost is $260,000.
The fact that you agree to pay off the value of the home to a bank over a period of years clearly shows that the bank has an investment in your home as much as you do. Should a fire damage it, for example, then you might face problems paying for repairs — putting your mortgage at risk of default. Therefore, the bank wants to protect your home as much as you do. This is why they will likely require you to buy homeowners insurance.
What You Might Have To Pay
When your lender requires you to buy homeowners insurance, you'll probably face a few different conditions you must meet.
- You'll probably have to buy structure coverage, usually for the home's replacement cost value. This coverage can help you afford to repair or rebuild your home to exactly as it was before the accident. Therefore, the property value can remain secure.
- You might have to carry damage deductibles of certain levels.
- In many cases, your lender will require that pay your premium in-full at the start of your policy's term. Some insurers allow you to pay your premiums by month, however.
- You'll often have to pay the insurance premium from a mortgage escrow account. The structure of the account greatly lowers your risk of missing the premium payment.
One benefit to this requirement is that many lenders allow homeowners to pay their premiums and mortgage payments in one sum. Talk to your lender to see how you can structure your mortgage and insurance requirements to find the most-appropriate solution for you.