Florida storm season can affect and setback several industries, but none so much as the real estate industry. Storms in Florida can affect many steps within the home buying and mortgage processes, so lenders, buyers, and sellers should be on high alert come storm season. Below are some highlights of the importance to prepare as much as possible when beginning the mortgage process during the summer months.
What Is the Mortgage Process?
The mortgage process largely begins with the loan officer assessing your financial information and credit history to determine the risk in lending to you. Once your initial application is received, your loan officer will help you get all the needed documents together to send to underwriting. The underwriter then reviews all of the credit, income, and asset documents received and ensures they meet investor guidelines. The underwriter may request additional information and will also list the remaining steps needed before clearing the loan to go to closing.
During this process, obtaining home insurance and having the home appraised is crucial. Lenders typically require an appraisal so they can ensure there is sufficient equity in the home and they aren’t over-extending the amount they are able to lend on it, in addition to ensuring the home is safe and habitable. Obtaining home insurance quotes early in the mortgage process is important, especially in Florida where storm season can be so unpredictable.
Appraisals and Storm Preparedness
Appraisals are typically ordered at the beginning of the mortgage process. The appraiser will do a quick inspection to ensure the home is safe, habitable, and to take photos/measurements if needed. The remainder of their work is then done at their office to determine if recent home sales support the value of the home being financed. If there are any areas of concern related to damage or deferred maintenance, the appraiser could require additional inspections or repairs. If the appraisal is completed and the home is in an area that is deemed to later be in a FEMA disaster area, the lender often requires a re-inspection by the appraiser to ensure the home is in the same condition as when last visited. This can happen at any point up until the point your new loan is officially closed and funded. This is most common during times when hurricanes sweep through an area and there are known tornadic activities or flooding. Re-inspections like this can cause delays in closing on the loan, in addition to additional costs not initially anticipated.
Having home insurance set up as soon as possible in the mortgage process is especially important in Florida. When doing a refinance, the insurance policy is typically already in place. However, on a purchase, you will want to get quotes early on and have the policy bound to take effect on your closing date. If you have not bound the policy yet and there is a named storm out in the ocean, insurance companies will freeze any new policies until the storm has passed. This could mean that your closing could be impacted because you are unable to get insurance in place. It doesn’t matter if the storm is headed in your direction or not. When shopping for insurance it is important to note that there is not a “hurricane” clause in the policy. Typically you will purchase a homeowner’s policy that has general dwelling and contents coverage. You can then add flood, wind, and hail coverage for additional charges. Damage from a hurricane typically would fall under the flood/wind/hail policies, not your general policy.
Depending on the scale of the storm, there could be other delays that impact the process. For example, the lender, title company, insurance company, or other offices could close in anticipation or as a result of storm damage. Additionally, if your employment is impacted in any way by a natural disaster, it could have impacts on your loan approval and closing timeframe