Damon Germanides (pictured top), co-founder and broker at Insignia Mortgage, told Mortgage Professional America that making clients aware of the issues they might face trying to secure homeowners’ insurance was a crucial consideration at the beginning of the mortgage process.
That’s because skyrocketing home insurance costs can, in some cases, put the application itself in danger. “We get on it early on in the loan process because we don’t want the client to have sticker shock when they get their insurance quote, or it could jeopardize the loan because the traditional underwriting matrix for insurance doesn’t work anymore,” he said. “In [certain] areas, they’re five times higher, sometimes, than what you’d expect.”
A borrower could even lose their approval if they’re not aware of what their insurance will cost, he said, because a quote of one or two hundred thousand dollars – as opposed to the expected $30,000 or $40,000 – could severely impact their debt-to-income ratio. “You might have just blown up your deal,” he said.
Solutions aren’t necessarily easy to come by, especially with insurance companies continuing to pull out of the state as the crisis mounts. Germanides said his team had put together a group of “very high-quality” insurance brokers who are sometimes able to get a better policy in place for borrowers.
Top of mind, he said, is making sure borrowers tackle the issue as early in the mortgage process as possible – ideally immediately after sending the loan application and other information. That’s been a key priority for realtors, too. “Everybody’s advocating applying very early for your insurance, starting to get your quotes going, and seeing what could be done,” he said.
