Can Homeowners Insurance Kill Your Home Purchase? How to Protect Your Deal

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Insurance is killing deals at closing

Welcome to Mortgage Mom Radio. I'm Debbie Marcoux, the Mortgage Mom. I usually do this show on Wednesday, but we had a bit of a family emergency, so it's Thursday — I still wanted to make sure you got the same valuable information I bring you every week. Today we're talking about insurance, because insurance has been a catastrophic nightmare for many in the mortgage industry, and I'm going to share what I do with my clients to make sure we get to the closing table without hiccups.

Here's the number: 21% of 2026 transactions have fallen through over insurance. That makes it the single most common non-financing reason for a deal to collapse. And a Federal Reserve Bank of Chicago working paper found that rising property insurance premiums directly increase mortgage application denials — premiums coming in higher than expected push debt-to-income ratios past the guideline and kill the underwriting approval. Their figures covered refinances, cash-out refinances, and purchase applications alike.

Look at Texas. In the Dallas–Fort Worth area, a $1,000 annual premium increase raises the probability of denial by 2.3 percentage points, and DFW premiums now run $2,580 to $3,741 a year depending on the zip code. To put that in perspective: back in 2021–2022, when we put a pre-approval together with no address yet to quote, we'd estimate maybe $120 a month for homeowners insurance. At $3,741 a year, that's $311 a month — which moves your debt-to-income ratio significantly, changes how much you qualify for, and changes what you're comfortable paying.

California FAIR Plan: the 29.1% hike

Two fresh data points from just this past week. First, the California Department of Insurance approved a 29.1% rate increase for the FAIR Plan, effective October 15 — the largest single-year hike in the plan's history. If you're a current homeowner whose only available coverage was the FAIR Plan, be mindful: your next policy, when it renews, is going to cost more than what you pay today. You won't see it on October 15 if you just renewed — these are one-year policies, so it hits at your next renewal, typically around the anniversary of your purchase. And please, don't be mad at your lender or your real estate agent; nobody controls the Department of Insurance.

What does it mean for your mortgage? If your insurance and property taxes are impounded — escrowed, same thing — your servicer will pay the higher renewal premium and then readjust the payment they collect from you so the escrow account stays funded. So do not be surprised if your overall monthly mortgage payment increases too.

If you're a buyer, be mindful of where you're looking — whether the homes you're considering sit in an area where private carriers won't write and you'd be forced into the FAIR Plan. That's exactly the kind of thing we need to know during pre-approval.

Florida: premiums up even after tort reform

Second data point: Florida premiums are up 14.3% since the 2023 tort reform — the reform that was supposed to bring premiums down for people struggling with hurricane, hail, and wind exposure. It's very important to get ahead of insurance before you get under contract and open title in Florida — or open escrow in California, Arizona, Nevada, Texas, or Washington. (Florida is a title state, Illinois is an attorney state; whatever your state calls it, your offer gets accepted, something gets opened, and you wire your earnest money deposit.) If you're serious about a house, it might take an extra six or seven hours on a weekday to reach an insurance agent and confirm you still qualify with the real premium — do it before you write the contract.

Where deals actually break

Failure point one: the lowball estimate. Nine times out of ten, a deal dying over insurance is a problem the loan officer could have handled at the very beginning. Say the loan was pre-approved at a 43% debt-to-income ratio using an insurance estimate of $2,400 a year — and the actual quote comes back at $6,800. That difference pushes you over the guideline, and boom: deal dead. The fix is shopping the actual address. A good loan officer has insurance agents they work with regularly and gets two or three quotes to compare the moment you fall in love with a home — either the premium works, or you learn the area is too expensive for your price range before you're locked into a contract.

Failure point two: no carrier will write the home. We're running into this too, and again it's discoverable up front — by trying to get quotes. It used to be standard, thirty years into this business, that you could estimate a premium from the price and the area and be confident. It is not like that today. The house backing up to a brush-covered hillside can be a high-fire property while the house across the street, past a busy intersection, isn't. Location has to be checked address by address.

Florida is a different animal. To bind a policy there, carriers require a wind mitigation inspection and a four-point inspection — and those don't happen until you're already under contract, as part of the physical inspection you pay for. The insurer is looking at the age of the roof and when it was last replaced, the age of the electrical panel, and whether the home is set up to withstand hurricane-force winds. What we can do up front is find out whether the home can get a private-carrier policy at all or has to go to Citizens — Florida's version of California's FAIR Plan for properties other carriers won't insure — because that alone is a big driver of premium cost. The four-point inspection can actually work in your favor, too: showing that things have been updated and are up to code helps bring the premium down.

And remember: a quote is not a binder. Think of a rate quote — if we don't lock, you're subject to the newest rate sheet. Insurance works similarly: carriers can change what they charge at any time, so a quote left unbound is an open possibility of a higher premium. My process, day one of every transaction: get an insurance quote — two or three if you can — and then bind the policy as soon as the contract allows, dated near your closing date so you're not paying for coverage on a home you don't own yet. In Florida, we bind as soon as the wind mitigation and four-point reports are in. If you're two or three weeks into your loan, you have loan approval, and your loan officer never asked you to get an insurance quote — call and get one now. Don't find out at week three that you're falling apart.

Carriers leaving, and who actually gets dropped

In California, there's been so much wildfire damage that insurance companies are declining entire zip codes, and at least one major carrier has stopped writing new policies in the state altogether — I'm fairly sure it's State Farm, though don't quote me. Here's the important nuance: if you already have your policy with them, they will not drop you. But if you sold your home and moved, they wouldn't quote the new residence. Carriers exiting pushes more volume onto the remaining companies, which pushes premiums up — and in zip codes nobody will write, homeowners end up on the FAIR Plan.

And understand what the FAIR Plan really is: it truly only covers the fire side. So you end up carrying two policies — the FAIR Plan plus a wraparound policy for everything else a homeowner needs, like liability if someone slips and falls or a pipe bursts. Two premiums instead of one. It gets very expensive. Florida is the exact same story with hurricanes and Citizens.

So when do people get dropped? Claims. Just like a car insurer can drop you after a DUI, a home insurer can decide you're too high a risk after a claim or multiple claims. But if your policy is in force, you pay on time, and you haven't filed claims, they're not going to drop you — even if they've stopped writing new business in your state.

State by state: insurance as of August 2026

Quick news first: I'm now licensed in 14 states — as of last week it was 13, and I've added Colorado. If you've been looking for a loan in Colorado, I can now help you there. Here's the insurance picture across my footprint:

Arizona — rising, especially in the wildland-urban interface: Prescott, Sedona, parts of Flagstaff. Lake Havasu, where I live, is still relatively stable — my policy there runs about a third of the average in California, Texas, or Florida. California — the FAIR Plan hike is happening October 15; private carriers are starting to return per Q2 CDI data, but wildfire zip codes are still really bad. Colorado — newly added to my licensing. Florida — premiums up 14.3% since the 2023 reforms; the wind mitigation certificate is non-negotiable, get the four-point inspection, and the Citizens depopulation effort is ongoing. Georgia — the coastal counties, Chatham and Glynn, are tightening; inland Georgia is relatively stable. Hawaii — wildfire underwriting scrutiny post-Lahaina remains elevated statewide, and premiums are high. Idaho — wildland-urban-interface pricing is rising the fastest in my 14-state footprint; quote and bind at the very start of the transaction. Nevada — the Vegas metro is relatively stable and Nevada has honestly been pretty good; the Lake Tahoe basin is difficult because of wildfire. North Carolina — the coastal Outer Banks are tightening; Charlotte and the Triangle are stable. Oregon — wildland-urban-interface pricing similar to Idaho and the California foothills; up in the mountains it's getting expensive and hard to place. Tennessee — severe convective storm losses are now driving Nashville-area premium hikes. Texas — hail is the number-one driver, DFW has the strongest premium sensitivity, and roof age is critical to the quote. Washington — stable overall, with tightening wildfire pockets in central Washington around Wenatchee and Chelan.

The take-home

There should be no reason a deal falls apart over insurance — but it happens, and honestly it comes down to not getting on top of the details right out of the gate. Do the research before the contract is written. And if you jumped under contract first — it happens; I have pre-approved clients who find their dream home a year and a half later and write an offer before calling me — that's okay, but then we scramble: call for your insurance quote right now. Falling out at the closing table is not something that should be happening.

If you want to know when I go live, text the word LIVE to 844-935-3634 — that's also the number for the office. Check out the website at mortgagemomradio.com: watch the show, play with the calculators, submit questions for the next live show, and opt into the weekly newsletter, which covers interest rates, what we talked about this week, and a scenario for extra knowledge. I'll be back next Wednesday at 3:00 p.m. Pacific on YouTube and Facebook. I hope you all have an amazing rest of your week. Talk to you all real soon. Bye-bye.