First-time buyers

What the lender actually requires

• Homeowners insurance, enforced — if it lapses the lender buys force-placed coverage at your expense
• Flood insurance, if the property is in a designated flood zone
• Mortgage insurance, on conventional loans below a certain down payment, or the equivalent on government-backed loans
• Title insurance at closing

What is optional

Mortgage protection life insurance. No lender requires it, and any solicitation implying otherwise deserves scepticism about everything else it says.

That doesn't mean you don't need life insurance — if someone depends on your income and you've just taken on a large debt, you probably do. It means the requirement framing is wrong.

The post-closing mail

Mortgage recordings are public records, so after you close your name, lender and loan amount become available for direct mail targeting. That's why the letter appears to know your loan.

Look for who actually sent it, usually in small print. Check for a licence number. Be sceptical of deadlines and "final notice" styling on what is an advertisement.

The order to sort it in

• Homeowners insurance, in place at closing — shop it rather than accepting the first quote
• Flood, if your address requires it
• Life insurance sized to the whole household need, not just the loan
• Disability coverage, since inability to work is a more common income interruption than death
• An emergency fund, which is what stops small problems becoming insurance problems

Two things people miss

First, homeowners policies are usually written on rebuild cost rather than purchase price, and the two are different numbers. Ask how yours was calculated.

Second, if you're carrying private mortgage insurance, note when you can cancel it. On most conventional loans it can generally be cancelled on request at eighty percent of original value and terminates automatically at seventy-eight percent under the Homeowners Protection Act, subject to conditions.