The roof is covered. The bank says no.

Closing Watch

The roof is covered. The bank says no.

An insurance quote can clear one hurdle and still leave a buyer unable to close. The roof is insured. The policy settles roof losses at actual cash value, which deducts depreciation. But the lender requires replacement-cost coverage.

I have dealt with this personally. Some lenders will not accept actual cash value coverage for the roof. If that requirement surfaces late, escrow can slow down or stop until acceptable insurance is secured.

Fannie Mae and Freddie Mac permit actual cash value roof coverage on loans they buy, subject to their other insurance requirements. That flexibility does not mean every lender will accept it. The dwelling still generally needs replacement-cost coverage, with an exception for the roof. It is not permission to insure the entire house at depreciated value.

In the programs I encounter, an older roof may qualify only for actual cash value or a scheduled percentage settlement. Replacement-cost roof coverage may cost more, require the property to qualify, or be unavailable under the proposed policy.

Roof age, material and condition matter. In some programs I encounter, replacement-cost eligibility depends on the roof being newer than 15 to 20 years. The exact cutoff varies by insurer and program; it is not a universal rule.

That creates the closing problem: the insurer may offer roof terms that Fannie Mae and Freddie Mac permit, while the lender requires replacement cost. Paying more does not necessarily solve it if the roof does not qualify.

Before relying on a quote, ask the lender whether it accepts actual cash value roof settlement for the specific loan. Get the answer in writing and have the insurance professional check the proposed roof terms against that requirement.

If replacement-cost roof coverage is required, identify that condition early. Determine whether the proposed insurer can offer acceptable terms or whether another policy option needs review. Neither approval nor availability should be assumed. Deductibles, limits, exclusions and policy conditions still control any claim.

The question is not simply whether the roof is insured. It is whether this lender will accept how the policy pays for roof damage.

Deal Context

Skipping the water device can mean a larger deductible.

Farmers, for example, offers certain eligible California home policies a minimum 2% or 5% water deductible instead of a required device. On $1 million in dwelling coverage, that is $20,000 or $50,000. Confirm eligibility, the accepted device and the deductible in dollars before accepting the quote.

Rental plans belong in the insurance review.

Tell the insurance professional about intended rental use, lease duration and expected vacancy before relying on the quote. Request roof, plumbing, electrical and HVAC update records early. Missing records can create underwriting questions. Ask what triggers loss-of-rents coverage and what limits apply; ordinary vacancy should not be assumed covered.

Partner Language

Language you can use

Please confirm how this policy settles a roof loss, what the buyer could pay after depreciation and the deductible, and whether these terms meet this loan’s requirements.

If the quote requires water protection, which device is accepted, when must it be installed, and what proof does the carrier need?

The buyer plans to rent the property. Please review the intended rental use, expected vacancy and loss-of-rents terms before we rely on the quote.