When new home buyers are purchasing a home, there are many pieces of information that need to be gathered and provided to the closing agent. One of these requirements may be proof of insurance for the property being used as collateral for the loan.
For example, if an insured’s son is purchasing a home and the mom is co-signing, the closing agent may insist on having a copy of the parent’s policy before closing the loan. The son will have his own policy, which the loan officer is “arranging” for him, but the closing agent may still require proof of coverage for the parent’s home.
So, why is this necessary?
One reason is that having a copy of the policy on file can help protect the lender’s interest in the property in case of damage or loss. If the property were to be damaged or destroyed, and there was no insurance in place, the lender would not be able to recoup their investment. By requiring proof of insurance, the lender can ensure that their investment is protected.
Additionally, having a copy of the policy on file can also help in the event of a claim. If a claim needs to be made, the closing agent will have all of the necessary information on hand, making the process smoother and less time-consuming.
It’s also worth noting that this requirement may be a lender or underwriting guideline. Many lenders have certain guidelines in place that must be met before closing a loan, and proof of insurance may be one of these requirements.
In summary, the closing agent may require proof of insurance for the parent’s home as a way to protect the lender’s interest in the property and ensure that the loan is being made on a property that is adequately insured. It’s also possible that this is a requirement by the lender or underwriting guidelines.
