Certain homeowner's insurance costs can only be paid at closing, hence, a loan that involves less than a 20 percent down payment usually requires the lender to impound, or escrow, property taxes and homeowners’ insurance. The lender determines how many months of homeowners’ insurance payments you must deposit at closing to establish escrow impound reserves. The lender uses the reserves to pay the insurance provider in case you miss payments. The lender also proportionally divides your homeowners’ insurance payment for the month in which you close another fee that can only be paid at closing. The disadvantage of impounding homeowners’ insurance fees is that it adds several months of insurance payments to your closing costs. However, it’s important to have an accurate idea of how much you can expect to pay for your premium.
Averagely, a one-year home insurance binder for closing will cost around $1,200 for a $200,000 home.