Home insurance question

Jessica4Bama said:

Sorry if I've asked this before, but can I get home insurance if I'm not living in the house? I am looking at some properties, but the houses will need some TLC. I wanted to get everything in tip top shape before moving. My grandmother said I couldn't get insurance on a vacant home, but my search seems to say otherwise. Is it possible and how big of headache is it to get if so? I'm just in the early stages of everything so any help or advice is appreciated.

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Yes, you can get insurance.

Jessica4Bama said:

Sorry if I've asked this before, but can I get home insurance if I'm not living in the house? I am looking at some properties, but the houses will need some TLC. I wanted to get everything in tip top shape before moving. My grandmother said I couldn't get insurance on a vacant home, but my search seems to say otherwise. Is it possible and how big of headache is it to get if so? I'm just in the early stages of everything so any help or advice is appreciated.

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I have insurance on my 2nd home, which isn't my residence. No idea why you wouldn't be able to

Jessica4Bama said:

Would I need to go through State Farm, who I use for auto? Or shop around?

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you can go through anyone you like but if you own multiple properties and cars you may want to shop them all at once to see who can provide you with the best deals. As a larger customer you can demand higher discounts. Insurance specifically likes bundled offers. Ask State farm but call others and include your car, there is nothing I am aware of preventing you from switching from State Farm (that I am aware of but I do not pretend to know Alabama Insurance regulations)

I don't do this as my 2nd property is in another State and in a risk area so I had different provider choices

I was with State Farm for 24 years, but switched to Amica last year for home and auto. We saved over 2K.

Talk to your agent. It will vary from state to state and carrier to carrier. For example, Allstate will do a home inspection as part of writing the new policy. If they see the home is vacant (as in no furniture, etc. - not like a second home that is furnished, just not occupied all the time), they will cancel the policy. That will make your life harder trying to get insurance with another carrier.

Your agent may be able to to write something other than home insurance while you renovate (like a fire policy). Something like that won't cover contents - only the structure. But that shouldn't matter if you haven't moved your stuff in.

If this is a rental property, they'll write you a landlord policy. If that's the case, double check with your carrier to make sure they include Vandalism & Burglary coverage. Lots of companies exclude that from the policy and you have to buy it as an additional coverage.

Bottom line: talk to your agent. Yours won't be the first vacant-while-we-renovate home that they've written a policy for.

Depending on your state of residence if you are not the primary resident of a risk you cannot get a regular homeowner policy.
If the risk is a rental you would get a fire policy for the building that would extend the coverage 10% for outside, detached structures
If you have contents in the risk you could add contents coverage as well.

I think the issue is that you cant get a normal "homeowners insurance policy" if you dont live there.You can get insurance on the dwelling however (fire, storm etc). At least that is how it is here in Md.

I've worked for State Farm, and they will issue a HO policy with a vacancy endorsement. It does depend on the state and the status of the home. I don't know if you have the State Farm Home/Auto bundle, but if you don't, I'm not sure that the vacancy endorsement will allow you to get that bundle.

Easy answer, put in 0 down with your income and watch what happens.

If you are looking to purchase a rental property be very wary of purchasing a home at the top of your ability to pay for it as your renters then become a lot less available, in other words, you won't have as many people that are able to rent it and it will sit vacant for long periods of time (except in certain areas). Same goes for lower price, you get renters that have no regard for the home.

Jessica4Bama said:

Thanks, guys for all the help.

Now when I'm doing the how much home can I afford scenario, do I need to take into account my down payment? Say I have around $80,000 for a down payment, and the online calculators say I can afford a $265,000 house. Is that $265,000 after they take into account my down payment meaning I am really financing a house for $185,000 or could I afford a $265,000 house after my down payment (technically a $345,000 house)? Sorry if this doesn't make sense. I'm just trying to see if I can comfortably afford these places.

I'm assuming the first scenario because I don't think there is a way I can comfortably afford a $265,000 piece of property.

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What you can "afford" is based on the loan payments so at any given income level you can "afford" more if you have more to put down.

We bought a new home last November with the intent to move into it at a later date. We got a policy on it, but it was cancelled because they said it was vacant. We had told them it was a part time residence when we got the policy and we did stay there over some weekends as we prepared to move.

I would advise at least getting some furniture in the front room so it would look occupied if somebody peeks in the window or front door.

Jessica4Bama said:

Thanks, guys for all the help.

Now when I'm doing the how much home can I afford scenario, do I need to take into account my down payment? Say I have around $80,000 for a down payment, and the online calculators say I can afford a $265,000 house. Is that $265,000 after they take into account my down payment meaning I am really financing a house for $185,000 or could I afford a $265,000 house after my down payment (technically a $345,000 house)? Sorry if this doesn't make sense. I'm just trying to see if I can comfortably afford these places.

I'm assuming the first scenario because I don't think there is a way I can comfortably afford a $265,000 piece of property.

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The general rule of thumb that I've used when purchasing homes is to have a monthly mortgage payment of no more than 25% of my take home income. You can back into a house price using that (loan amount with fees + down payment). Up to you whether you do 15 or 30 year, but if you can afford it, I'd go 1 year. Get that sucker paid off quick.

Jessica4Bama said:

Well I thought about doing a 15 year mortgage, but if I take the extra $300 I'd save doing the 30 year and invest that into my investments account, I would come out well ahead in the long run (assuming I live in the same house for 10 plus years). Is this a fair assessment?

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Maybe. There are a lot of factors to consider: avg annual return on your investment, will you be disciplined enough to put in the $300/month, etc.

You will pay more interest the longer the loan is financed. Example: $100k for 30 years at the 3.75% you quoted, you'll pay $66,722 in interest over the life of the loan. That same $100k for 15 years at 3% comes to $24,305. So your investment would have to at least make up that $40k to break even, so to speak.

Many people who attempt to employ this strategy never actually save. They start saving but then "temporarily" want to funnel a few months of $$ to something else and they never get back to saving the difference. Though I recall you mentioning a significant down payment, so you may be a natural saver and might be disciplined enough to follow through.

My personal preference is to eliminate debt as quickly as possible. Saving all cash for a house is difficult, so if I am going to pay a mortgage, I want it to be as small as possible, as short as possible and I'm going to pay it off aggressively. But that's just my financial philosophy.