Snoqualmie Market

Archive for March, 2009

When you purchase a home, your mortgage lender almost surely won’t allow you to close the purchase until you’ve demonstrated that you have proper homeowners insurance. Lenders aren’t being paternalistic, but rather selfinterested. You see, if you buy the home and make a down payment of, say, 20 percent of the purchase price, the lender is putting up the other 80 percent of the purchase price. So if the home burns to the ground and is a total loss, the lender may care more, at least financially, than you do. In most states, your home is the lender’s security for the loan.

Some lenders, in years past, learned the hard way that some homeowners may not care about losing their homes. In some cases, where homes were total losses, homeowners with little financial stake in the property and insufficient insurance coverage simply walked away from the problem and left the lender with the financial mess. Because of cases like this, almost all lenders today require you to purchase private mortgage insurance (PMI) if you put down less than 20 percent of the purchase price when you buy.

When you buy a home, you should want to protect your investment in the property (as well as cover the not-so-inconsequential cost of replacing your personal property, if it is ever damaged or stolen). In short order, your clothing, furniture, kitchen appliances, and beer-can collection can tally up to a lot of dollars to replace.