Explain to me why I am told to pay $9,259 in prepaid items before closing, outside of closing costs.
Im going to need $18,251 cash to close, outside of down payment
Why do I pay a years worth of real estate taxes in one shot? ($2500)
WTF is hazard insurance and why is it $150 a month? ($1,800)
My FHA mortgage premium is $3377
$29 a day for 30 days? (~$870)
Thats just some of the bigger items.
And this is a 200k rental property.
Can anyone break this down for me in english
1st year of taxes usually go to an escrow account. I believe you pay 1 yr upfront, and still monthly payments into escrow. But I’m still not positive as to how that all works. I got a combo of owner/private financing, and just pay taxes when they are due, aside from the difference that the seller paid, which is due at closing. Banks suck.
Hazard Insurance, which I am guessing is just the Home Owners/Property Insurance, is also due up front, 1 year premium paid in full at or before closing.
.
2500 taxes a year?
what town?
Got 3.5k on a 70k home in lancaster here.
Hazard insurance is your property insurance. You always pay a full year up front. Mine was about 600, but your property is over 2x more than what mine cost.
Also you fill the escrow account to pay taxes out of. You usually pay a years worth of taxes. The upside is you earn interest on this money until they pay it out.
If you put down less than 10 percent in a FHA then you pay the FHA mortgage premium. I think this is like a prepaid point and a half.
we put down 7%.
its in the city, off elmwood.
That seems a little high actually. My cash for closing was about $6K on a property more expensive then yours, but then again I’m in TX so NY might be sticking their fingers into the pot.
Hazard like everyone said is your insurance. Rentals are generally higher then homes. I’m paying ~$900 for 300K coverage.
You have to pay taxes up front then they escrow monthly as said. Some banks will wave this and allow you to save up for taxes on your own, BUT they usually require ~%40 or more of the loan to be paid up front.
Premium sounds like bank fees to me. Some banks charge you up the ass in fees to make a little money off government backed loans.
Also if you only put down 7% you will be paying PMI which for you I would think should come out to be about $80 per month.
Shits fun right?
Try going to a bank and asking for a line to cover the 13% in order to have 20% paid. Then pay back the line each year rather then pay ~1000 in PMI…
Hazard Insurance is basically Mortgage forced insurance… Its the mortgage companies way of making sure there is insurance on the property. They have that on there if you haven’t provided proof that you have purchased your own insurance for the property (i.e Declarations Page)…An yes it is VERY expensive and you don’t have nearly as much coverage (Normally only fire lightening and intern explosion).
I deal with people everyday that are mad because their policy cancelled and the mortgage company forced hazard insurance down their throats.
Hope this helps!
Get your own homeowners and that hazard insurance goes away when you show them a binder
Allstate was the cheapest for my homeowners. Don’t you qualify for Sonyma or any other 1st time homebuyer programs? They covered my closing costs for me.
the real question is why are you buying a rental property when you don’t know the meaning of these very basic terms.
hazard insurance is homeowners, its just escrowed, its collected and paid in advance (along with taxes) because payments going into escrow will be going for next years disbursements.
IT IS NOT FORCEPLACED INSURANCE. especially not on a new loan,
and $29 a day for 30 days sounds like per diem interest. more info needed on that.
FHA mortgage premium is bc you arent paying 20% down, sucks for you.
dont you have an agent? did you read the truth in lending act paper/form that you had to sign? did you read any documents that you had to sign???
For FHA loans you pay a 1.5% up front insurance premium … sucks
I’m really surprised this wasn’t all laid out and explained to you already.
It was passed along to my bro, who recently relayed it onto me.
Im calling tomorrow to get to the bottom, I just wanted some opinions before I bust some skulls for no reason
Really!?!? I work in homeowners insurance every day! Would you like for me to scan the copy of my manual that clearly states “Force Placed/Hazard Insurance” and then goes into detail about what it is, insurance for the property with no liability insurance for the buyer?
An it being a new loan has absolutely nothing to do with the fact that the mortgage company puts insurance on the property. The mortgage company is just trying to protect their risk by making sure there is insurance on the property. Provide proof that you have purchased your own by giving them a copy of your declarations page and it will be removed.
LOL, trust me, the numbers aren’t wrong… don’t you have a lawyer to ask these questions to?
You pay a years worth of taxes in one shot, because you set up an escrow account. When the taxes are due, it gets paid off without you writing a check to the town.
Not sure what the premium actually means.
and the $29 for 30 days sounds like upfront interest. You won’t be paying a mortgage payment for the first month, but since you took ownership, you are responsible for the interest due over the days you’re living there without paying towards the principal.
christ you are ignorant. just because your ‘manual’ says something doesnt mean you take it for gospel.
hazard insurance covers the HOUSE. fucking idiot. the mortgage company gets a cut because they have a LIEN on the property. If there is no mortgage and the house burns down, the home owner gets a check to do with what they please. If the customer gets an insurance check that is greater than the payoff on a loan, the customer can use that check to pay off the mortgage and not fix the house. wow, what a concept!
signing a promissory note states that you will maintain adequate coverage, if you do not it also gives the mortgage company the right to place coverage and make you pay for any time there was a lapse. Sure, some investors require it to be escrowed, but most loans I see are non-escrow; as in THE MORTGAGE COMPANY HAS NOTHING TO DO WITH IT. they just need a dec page to prove coverage. if a new dec page is not received when the policy expires THEN there is forced placed coverage put onto an account just in case there is no mortgagor provided insurance. (to cover the lender/investor, but a customer can place a claim against force placed ins just like insurance from any other carrier. I have seen people that end up keeping the forced placed) If there was no lapse and it was placed in error the loan gets a full refund of anything that was paid and its as if nothing happened.
It being a new loan has everything to do with the fact that its not forced placed. forced placed means that the mortgage company bought a policy for the person. no one is going to be able to close on a loan with out their own proof of insurance.
just because you can read the words doesnt imply you know what they mean
:rubicant:
Ignorant? Really? I wouldn’t have a problem with you calling me ignorant if it wasn’t for the fact that you just basically repeated everything that I said. (You said hazard insurance covers the house, I said it covers the property, hmm sounds the same) (You said the mortgage company gets a cut if the property burns down, I said that they make sure that there is insurance on the property in order to protect their risk.Hmm sounds pretty fucking similar) (You said hazard insurance is homeowners insurance, I said it was homeowners insurance that was put in place by the mortgage company.)
An i never said that it had nothing to do with being escrowed, at $1800 yeah it sounds like it is escrowed.
Don’t try to use big long sentences to make yourself feel smart. Don’t try to argue with me about homeowners insurance unless you hold an insurance license.
Oh… An just because you can read a couple of article about homeowners insurance on the computer, DOESN’T mean you know what you’re talking about. Now who’s a fucking idiot. :smash2: