Must the borrower show proof of homeowner's insurance to the lender?

The requirement for a borrower to show proof of homeowner's insurance to the lender is fundamentally linked to the lender's interest in protecting their financial investment in the property being financed. Homeowner's insurance provides coverage against various risks, including damages from fire, theft, or natural disasters, which can jeopardize the property’s value.

When a borrower takes out a mortgage, the property serves as collateral for the loan. If the property is damaged or destroyed, the lender wants to ensure that it can recover its investment. Therefore, lenders generally require borrowers to provide proof of homeowner’s insurance before closing on a mortgage. This is a standard practice in the lending industry, as it mitigates potential risks and protects both the lender and the borrower in the case of unforeseen events affecting the property.

This requirement applies to both purchasing a home and refinancing, ensuring that the property is adequately insured throughout the duration of the mortgage. Importantly, while there may be some legal stipulations regarding insurance requirements in certain contexts, the overarching principle remains that lenders need to see proof of homeowner’s insurance to proceed with the loan transaction.