I am haggling for every piece of the backend DTI % I can get.
I need to know what the minimum property insurance requirements are for USDA rural guaranteed loans.
Like, can we have a high deductible, lower limits, etc.
Please understand this would be temporary in nature for approval.
As an insurance agent and re sales, I have seen many requirements.
Generally, the bank requires you to carry, at a minimum, the amount of the loan. The problem with that is homeowners insurance policies require you to insure to value, replacement cost, which is typically more than the loan amount and the bank requires replacement cost on the policy. This is usually non-negociable.
Deductibles, in my experience, are usually capped, per bank requirements, at $1,000 for homeowners policy. While it seems that a deductible this high will save money, it usually only cuts 5-8% off the premium, if that much.
I do not know USDA specifics but I'm sure they would be similar.
Agree-check the amounts with higher deductibles. I used to always have high deductibles on cars and house but then one time I had them check both ways and it was really only saving me $5-10 a year, so now I have the lower deductibles.
I just set up a new homeowner's policy for the house I am purchasing with a USDA Gauranteed home loan. My LO never mentioned anything to me that they require certain coverage, other than to cover replacement of the house. There was no discussion over what USDA required either.
The company I used for the insurance set the policy up for the replacement value of the house, which, in my case, is about $60,000 more than the final purchase price of the house.
I was quoted approximately $600 for a $1,000 deductible and $450 for a $1,500 deductible. So, in my case, the higher deductible saved a large percentage of the rate.
Basically, this is how my policy breaks down (which I would assume is pretty standard):
Real Property $
Personal Property $
Loss of Use $
Personal Liability $
Medical Expenses $
Like I said, I was never told anything about USDA requirements. I would say my coverage is not set at the absolute lowest coverage amounts, but it certainly is not super high. USDA was apparently fine with a $1,500 deductible as it passed through them with no problems. I do not know what their limit is though.
I do remember reading in the closing documents somewhere that the initial policy must be a 1-year policy. But, I'm sure you could change it after closing.
Have you asked your LO about a USDA waiver for your ratio? If you have any compensating factors, they may allow you to go over on one of your ratios. I was a little over on one of mine, but had a few compensating factors and the ratio was not an issue at all.
However, (anyone with more knowledge can correct me if I'm wrong) I don't believe homeowner's insurance is calculated into your back end ratio. I know my car insurance was not asked for. Everything I have read does not include insurance products in the calculation, just loans or credit cards and the like. Looking through all my documents, my ratio did not change once I secured a policy. The UW and USDA only wanted to see the insurance rider was in place.
(Sorry this post isn't a huge help! I'm still learning the ropes myself as it is my first home purchase. So, this is just based on my experience with the mortgage approval process and working with USDA within the last month.)
back end ratio includes PITI
I forgot that was already being counted in there! No help from me!