Is it true that lenders won't lend without a homeowner's insurance binder?

Question

Is it true that homes that are in a true state of disrepair are sold to cash buyers because it's difficult to get homeowner's insurance on a falling apart house? 

Answer 1

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The first is true.  You must come to closing with at minimum a binder. 

The second might be true. It's up to the individual insurance company as to if they will write a policy.  The reason some properties are cash-only is not over insurance, it's because the property will not pass the lender's appraisal. 

Answer 2

Usually true. When I bought my own house, I bought a 'shell'--no plumbing or electric.  I paid cash. I could not live in the house before it was completely fixed up--so I had to get homeowner's insurance so the house could be brought up to livable quality. I had to find a company that would write a "vacant property' policy--which cost quite a bit more than a regular one. And it took me several tries. I did eventually find one. As soon as it was expired, I got a regular policy. 

Lenders may only lend if you have cash to show them that you are able to make the house habitable.  They may not lend anything if the property can't be occupied. 

Answer 3

They will require you to have insurance, yes.

Answer 4

Nobody lends on a house without insurance. Cash buyers do not have to have insurance.

Answer 5

ALL lenders in the US of A will require you to have homeowners insurance prior to closing. 

Answer 6

Yes, of course any lender or prospective buyer would want a good home to back up the loan or to live in, fix up, or sell in the future.

Answer 7

Depends on which state you are in and what the rules of your bank are.  In Wisconsin I did have to have homeowners insurance before completing the paperwork.