What, exactly, is escrow?
Most lenders require homeowners to pay hazard insurance and taxes, and, in some cases, mortgage insurance in monthly installments. The monthly installments go into an escrow account set up by the lender. The lender then pays the bills from the escrow account. A borrower might ask: “If I never see the bills, how do I know if the monthly set aside is correct?”
Find out correct amount.
You may need to contact your taxing authority and insurance carriers to get the amount for the bills. Your copy of the lender’s annual report to the Internal Revenue Service may also break down the expenditures from your escrow account.
Here are some danger signs that indicate you may be overpaying into your escrow account:
Will I be able to find out the results of the appraisal?
Under new rules, home mortgage borrowers now have the right to a copy of the complete appraisal documents the lender used to decide whether or not to approve your loan. You may also see any in-house reports that affected the market value assigned your home.
Send for information.
Your lender may automatically send you a copy, but if not, you have 90 days to write for the appraisal after the lender informs you of the decision on your loan application.
As professionals, we are familiar with the real estate rules and regulations that might have you stymied. We’ll be happy to work with you and help eliminate any confusion about the home buying experience.
Will I have to get mortgage insurance?
You may be able to reduce the cost, even if you can’t entirely avoid the expense of mortgage insurance, by asking for lender-paid insurance. Although most lenders don’t advertise the fact, they often will pay the mortgage insurance premiums in exchange for a slightly higher interest rate on the loan. This makes the insurance cost a tax deduction for you because it has become an interest expense instead of a non-deductible insurance premium.
Ask your lender for help.
But, since the higher interest rate stays in place for the duration of the loan, this plan is best for homeowners who plan to move by the time their equity reaches 20%, when the insurance typically would have been discontinued. If you plan to own the home for a long time, paying the insurance premiums yourself may be a better deal. Ask your lender for details.
What are some sources for out-of-pocket cash to pay closing costs?
Sometimes the amount of cash needed to close a sale comes as a shock to first time buyers. Taxes, recording fees, insurance premiums, pro-rated interest, escrow deposits and other expenses can easily reach into the thousands of dollars. Rather than reduce the down payment to pay these costs, many novice homebuyers have other sources of funds they might not think of using.
Here are seven to consider:
What are some typical closing costs?
When you apply for a mortgage, the lender must respond with a Good Faith Estimate of Closing Costs, which explains the costs you will likely have to pay at settlement. But the numbers on the form are estimates, and the final tally could be higher or lower.
Some of the more common charges are:
We can help with every step of your home-buying experience. Call us or e-mail us now.
Once a settlement date is set, can it be changed?
Settlement it the last step in home buying – before the moving begins, that is! Sometimes called closing, settlement is where the seller receives the funds from the buyer and the buyer gets proof of ownership. While everyone does their best to meet the settlement date, it is important to remember that many things can crop up to delay the settlement.
Remember, delays in settlement do not necessarily mean the transaction is falling apart. Most transactions do eventually go to settlement. Many problems can be straightened out in a day or so. The key is flexibility.