Most lenders look at current HOI policies that they might receive from other customers for varying amounts and determine a rough estimate based on a cost per thousand or develop a cost estimate based on a range of housing values. It only has to be in good faith and not exact. It also can be based on basic policy costs as some customers might have extra coverage for a variety of extras, such as jewelry or art.
Estimating Homeowners Insurance Costs
What is the best practice when estimating homeowners insurance costs for Loan Estimate and Closing Disclosure? Do lenders generally get quotes, or reach out to the insurance agent, or have the borrowers do this? We are having a hard time understanding how we would disclose this information to a borrower, especially on purchase transactions in which they likely have not set up insurance for the property at the time of application.
First published on 01/02/2022