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A conditional mortgage approval does not guarantee that the home has acceptable insurance. Before deciding whether to remove a contingency, confirm coverage, cost, and what your lender still needs.
Three questions before removing a contingency
First, will an insurer issue coverage for this property and intended occupancy? Second, does the coverage meet the lender's requirements? Third, does the combined premium and deductible fit the household budget? A preliminary quote does not answer all three.
For illustration, a $2,400 annual premium estimate that becomes $6,000 adds $300 per month, even if the mortgage rate stays unchanged.
The California FAIR Plan (new tab) may be an option of last resort; its basic coverage may need to be paired with a Difference in Conditions policy. Compare the combined coverage, exclusions, deductible, effective dates, and total premium with a licensed agent.
A real estate agent or attorney, not a mortgage article, should explain contract deadlines and deposit consequences.
What I would do next
Get written insurance terms, have the lender update your payment and insurance conditions, and ask your real estate agent or attorney to review your contract deadlines. I would rather identify this problem before the buyer is committed.
A practical point to remember
Coverage availability, lender acceptance, and contractual contingency rights are separate issues.
References
- Fannie Mae: evidence of property insurance (new tab)
- CFPB: shopping for homeowners insurance (new tab)
- California Department of Insurance: finding residential insurance (new tab)
Educational information only. Illustrative figures are not loan offers or current rates. Financing subject to underwriting, program requirements, and applicable disclosures.
