Property Insurance

The Scenario: A hurricane hits, or the kitchen catches fire. If the house is destroyed, the collateral for the loan is gone. The borrower must carry hazard insurance. The policy usually lists the lender as a "loss payee," meaning if the house burns down, the insurance check is cut to both the owner and the bank to ensure the house is rebuilt or the loan is paid off.The "Live In It" Clause: Most residential loans require the borrower to move into the home within 60 days and live there for at least a year. Why? Banks know that people fight harder to save the roof over their heads than they do for a rental property. Therefore, "owner-occupied" loans get lower interest rates. Lying about this is mortgage fraud!Maintenance and Covenant of Good Repair - The "No Slumlord" Clause: You cannot let the property fall apart. The house is the bank's safety net. If you let the roof leak or the foundation crack, the value of that safety net drops. The lender has the legal right to inspect the property and ensure you are maintaining its value. Ideally, the bank never wants to own your house. But if they do have to foreclose, they want a house they can sell, not a tear-down. This clause ensures the asset stays valuable.