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Why do I have to purchase homeowners insurance in order to obtain a mortgage?

Your home is the collateral for the mortgage loan you're obtaining, so until you pay your mortgage in full, your lender has a financial interest in your property. As a condition of making the loan, your lender will require you to purchase a certain amount of homeowners insurance that will protect both you and the lender in the event that your home is damaged or destroyed.

Generally, at the closing or a few days before closing, you'll be asked to submit proof of coverage, with the lender named as loss payee. If you have any questions, ask your mortgage lender or your insurance company or agent for more information about what's required.