As of the first year, the Federal Housing Finance Agency announced that it would begin to phase-out mortgage loans that exceed a threshold value. While this sounds good in theory, it will harm homebuyers. To continue to receive mortgage loan discounts, homebuyers will be required to have more than 20 per cent of the value of the cash home. If you’re already thinking about buying a home, you’ll likely want to act fast.
When the FHFA announced its phase-out plan, it explained that many lenders have already stopped offering mortgages to homebuyers who don’t have more than 20 per cent of the purchase price in cash. Buy a home, and you’ll need to secure financing without exceeding the value threshold. Fortunately, there are other ways of getting home without having to sell everything you own. One of the most common solutions is buying a home as an individual instead of as a buyer’s agent. To do this, you’ll need to secure a mortgage and pay rent simultaneously. Purchase renter’s insurance.
You’ll Be Protected Against Losses.
A mortgage payment is an insurance on your home. The lender is essentially paying your mortgage interest in exchange for the right to foreclose on the home if you don’t make your payments. So by securing a mortgage and paying rent, you’re essentially paying for insurance that protects you against losses.
Twenty per cent down payment, or if you can’t get a mortgage because of the valuation threshold, you have a couple of options. You can use the rental income from another property or put 20 per cent down and then rent your current home while you’re looking for a new one.
You’ll Be Protected Against Damage.
Another reason to buy renter’s insurance is that it protects you against damage to your home. If a fire, water leak, or other event damages your home, you’ll want to be able to replace it. Won’t cover damage to your home. And even if your policy does cover the damage, you may have to pay for repairs. Most policies require you to pay for repairs in the same amount as you paid for the policy. It’s not as straightforward as simply replacing your home.
Your Mortgage Company Will Be Protected
Mortgage companies are passing the cost of the FHFA’s mortgage regulations onto homebuyers. That includes the increased mortgage application and mortgage processing fees. But the mortgage regulations are so complicated that many lenders are still figuring out how to implement them. That means they don’t have a clear plan on how they’ll charge more for new mortgage loans.
That’s a problem because mortgage companies collect mortgage interest just like homeowners’ insurance. And like homeowners’ insurance, mortgage companies pay for some of it in exchange for the right to foreclose on your home. So, if mortgage companies pass on the FHFA’s higher costs to homebuyers, your mortgage company will be protecting itself by reimbursing you.
It’s Good Business
Homeowners who have unnecessary expenses are a burden on the entire economy. When one person holds a lot of excesses, it means there’s less for everyone else. It would be best to get rid of unnecessary expenses, like home insurance and mortgage insurance.
By getting rid of these expenses, you’ll be doing your part to help keep the cost of homeownership affordable. And it’s good business because it takes less risk for you to have homeowner’s insurance. You have to risk to make a profit. That means it’s good business to protect your home with insurance.
You’ll Be Protected against Theft.
One of the biggest reasons to buy renter’s insurance is that it protects you from theft. You may have heard that burglars target expensive homes because they assume the owners will have expensive insurance. But that’s not true.
It’s the exact opposite. Burglars target homes with cheap insurance because those homes are less likely to have insurance. If you don’t have insurance, you’re less likely to hire a security guard or install an alarm system. And if you don’t take those steps, you’re less likely to protect your home with a security system.
Conclusion
Homeowners insurance protects you in case something happens to your home. Renter’s insurance protects your physical property and financial assets, like your credit score and money. You need to buy both homeowner’s and renter’s value and damage.
Even if you don’t live in a high-value area, you may benefit from buying a policy that protects you from loss of value. And as someone who’s looking to buy a home, it’s important to protect your finances and credit score. That’s why it’s important to buy renter’s insurance.
