Hi so I am currently in the process of closing on a home when my lender thought it would be smart to totally never bring up the cost of prepaid items to me before closing on the loan. I know what you are thinking how could you possibly not know that. Well I a first time home buyer and had no clue so yeah I guess I am to blame a little bit here. My question is to you guys when it comes to escrow what is standard. I am reading that you must pay your homeowners insurance policy for a year and 3 months of homeowners insurance that goes into escrow along with 3 months of property taxes that go into escrow. My lender is trying to say that 6 months of property taxes for escrow is standard. Will someone please point me in a the direction of what is right and what is wrong here. My lender seriously doesn't
even know what is right. as you can see I am paying for property taxes twice for escrow. Can someone please help me figure out what is right. It is a conventional loan at 3% down
That looks about right...
Your insurance policy is normally for a year and that has to be paid in full. Depending on how your property taxes work/billed, three months could be your max that you get hit with. Then, they want another few months to have some money escrowed. This follows some formula by law. The point is, they want to make sure there is always “enough” money in the escrow account to cover the taxes. So, there will always be “extra”money in the account. It can’t be perfect because they need to have a fixed monthly payment to give you for the year. Also, if the taxes jump up one year, the escrow account has to be able to cover it immediately while you are catching up with your monthly payments.. the good thing is that it’s still all your money(the escrow), you just don’t have access to it...
Are you sure this esitmate wasn’t given to you before? It would be a TRID violation which is pretty serious...
You’ll see that it’s the same for the insurance premium. There is a three month buffer being established. If your premium is the same in one year, you’d have the same initial three months worth of payments left over in your escrow account. But, if the premium increases next year, there will be some extra cash in the escrow account to cover it since the premium is due in full at the beginning of the policy. In the meantime, your monthly payment will go up some commensurate amount to rebuild another one year’s premium worth ANd the buffer amount (or so).
If you want to chat about it, send me a direct message and I’d be happy to talk you through it.
The standard is whatever the lender requires in most cases, you don't really have an option. They may not give you a loan if you disagree with their terms. 6 months property taxes in escrow is not uncommon in my market.
My realtor has never seen an appraisal deemed defective like this so I'm looking for feedback because I'm curious to learn more.
You should always get a GFE from a lender pretty quickly after you apply for a loan. You should also READ and UNDERSTAND it before you go forward If you don't have the lender or your broker explain it and it's consequences.
Impounds usually happen with lower downs and the lender is trying to protect his interest. Ask what it would take to remove impounds. I think the initial insurance/taxes impounds may just be their requirement.