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Why I cried during my mortgage closing

Yeah, I admit it. I cried during my closing, and it wasn’t pretty.

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Editor’s note: Thanks to reader REL for highlighting that today’s lending atmosphere makes it unlikely that Gretchen’s exact story would happen to you if you are closing on a house today (the 90s were another time!) – but it’s still always good advice to read everything you get from your loan officer so you can best prepare yourself for your closing.

I cried at my mortgage closing over something as simple as homeowners insurance. Granted, purchasing a home is one of the most important financial decisions you can make, so you gotta understand how it could provoke some anxiety, especially if you don’t know what to expect!

And I totally didn’t know exactly what to expect during the closing. The loan officer was a pretty nice, trustworthy guy who knew his stuff. I don’t think he did anything wrong. In fact, I blame myself for the tears.

My husband (at the time) and I fell in love with a beautiful 1919 house in Milwaukee’s hip and very walkable Bay View neighborhood. We put an offer down on the house and it was accepted. The closing was such an exciting event for us! Settling in our chairs and ready to start the process, my husband and I whipped out our pens and started signing. And signing. And some more signing. And yet even more signing. Sign here, then sign there. Again. (This was back in the 1990s, so the concept of eMortgages was still in its infancy. Plus, my name was hyphenated at that time, so my signature was obnoxiously long.)

But the thing that really got me was when the loan officer asked for proof of homeowners insurance. Dumbfounded, I replied, “Wait… what?” There was a pause. The loan officer repeated, “You did bring proof of your homeowners insurance, didn’t you? You know it’s required in order to close, right?”

Why, no, Mr. Loan Officer. I do not have homeowners insurance.

THAT’S when the tears started pouring out! (Mine, not Mr. Loan Officer’s.)

Most lenders require borrowers to obtain a homeowners insurance policy before closing. Basically, homeowners insurance is a safeguard to make sure you’re not stuck with emergency costs that might prevent you from paying your mortgage and possibly lead to losing your home.

Mortgage closing tip #1: Learn about homeowners insurance

Homeowners insurance (otherwise known as hazard insurance) is designed to:

  • Protect your home against damages like fire or storms
  • Protect your possessions in the home
  • Provide liability coverage against accidents in the home or on the property

Our loan officer suggested that we call our insurance agent, and I did, even though it was already 4:30 p.m. Thankfully, our insurance agent was still in his office, and because he had worked with my family for decades, he created a policy for us and faxed over the proof on the contingency that we pay the premium the following day. Our agent saved the day! And our loan officer said we were very lucky to have such a trusting insurance agent. All was good, and we ended up closing the loan successfully.

But get this. When we were packing to move into our new home, I came across a checklist that our loan officer had mailed us prior to the closing. Guess what was on that checklist. Yep! Proof of homeowners insurance. So the loan officer did try to help prepare us; I was just too inexperienced and excited to pay attention to the details.

The moral of the story is, not only should you take out a homeowners insurance policy on the property before closing, but also make sure you’re educated and prepared before starting to shop for a home and a mortgage. It just may save you from losing the house, or losing some tears.

Mortgage closing tip #2: Learn about the other kinds of insurance relevant to homeowners

Types of insurance you should know:

  1. Homeowners insurance – protects homeowners from loss due to theft, fire or other disasters
  2. Mortgage life insurance – pays off a mortgage if the homeowner dies or becomes disable
  3. Mortgage insurance – lenders and investors typically require mortgage insurance for loans with down payments of less than 20%