After you close on your mortgage in Tennessee, the period between months 1 to 30 (or 15) will be full of uncertainty. You could lose your job, suffer from a serious health issue, or get incapacitated due to an accident at any point. Any life-altering event that might affect your capacity to pay for the biggest debt of your life could cost your home.
Although many Tennesseans choose not to entertain such negative thoughts, it pays to deal with them before it’s too late. You may not be able to predict the unforeseen with accuracy, but you can prepare for the unexpected early on. For starters, any experienced loan officer in Jackson, TN would advise you to think about these types of insurance when applying for a mortgage:
Private Mortgage Insurance
Also known as PMI, this insurance isn’t optional if you make a down payment less than 20% of the property’s total price. It also applies when you refinance a current mortgage when the house has less than 20% equity. It’s designed to protect the lender — not you — from financial losses in foreclosure should you default on your loan.
The good news is you can stop paying the PMI premium once you’ve built equity equivalent to 20% of your property’s value. To avoid this expense in the first place, save enough money to shoulder one-fifth of the house’s price upfront.
Getting a homeowner’s insurance policy can cover the cost of repair or replacement of your property (and its contents) when damaged by fire. In case your house burns down, this type of insurance would bail you out. Then again, every policy is different. Read it word for word to understand the scope of its coverage before you sign on the dotted line.
Mortgage Protection Insurance
Although you’re not required to have it, it’s worth the expense. Considered as the life insurance of the mortgage world, the mortgage protection insurance’s death benefit would pay off your loan in case you pass away before it matures. Some policies include disability coverage, which would take over your mortgage payments when you could no longer work with incapacity.
If you get sick for a long time, a portion of your death benefit may be used to pay the balance. It can also cover your payments in case you become unemployed. A policy with a money-back option would refund you the premiums when the benefits are unused by the end of the mortgage.
Paying for insurance can be a burden, but it’s a blessing in times of need. It may cost money, but absolute peace of mind is priceless.