We are doing a loan for a house that will be demolished 30 days after the loan closes. The house/property is valued at $740,000. The loan is for $440,000. The lot is valued at $340,000.
What homeowners’ insurance, if any, do we need to get? The customer has plenty of cash, and we could do an uninsured loan for the difference in lot value and loan. I just wanted to make sure we weren’t required to get insurance. My research isn’t coming up with any requirement.
For flood insurance there is a special rule that permits you to get sufficient insurance to complete the destruction of the property and haul off the debris. But flood insurance is required by law; hazard insurance is required by bank policy. So it is pretty much your call on how to handle this issue.