I believe your down payment has to be at least 20% if you want to avoid having to escrow and having PMI.
Yeah, I believe that is what she said, since we don't have 20% down we can't avoid escrow but we don't have to pay PMI because of the type of loan we have. I'm still trying to figure out this escrow from what has been described here though.
Escrow is simply an account held by an agent of the lender (or the lender themselves). Assume your yearly property taxes are 2400 and your yearly insurance is 1200. Also, remember that property taxes are essentially paid for the prior year. Based on my hypothetical numbers an additonal $300/month will go into the escrow account. At closing it sounds like they want the $1200 up front for insurance. this is not unusual. They will pay the insurance company and then next year, they will have the additional $1200 to pay next year's fees. Again, assuming you move in on 07/01, you will owe 1/2 year's taxes (07/2009 - 12/2009), but that payment is not due until 05/15/2010 (at least in Texas and Minnesota). Your escrow account will be evaluated every year. If your insurance and/or property taxes go up or down, your monthly payment will adjust accordingly. Also, if there is a surplus in your escrow account, it should be refunded for you. The very first time we bought a house, they estimated the property taxes incorrectly and we received an $800+ refund the following year. Ask them to please explain why you can't waive escrow. Generally, lender will charge a fee (could be a flat fee, could be 1/4 point or so) and you need to decide if it's worth it. If you are responsible to save the money yourself, it will pay off in the long run. As to why they charge a fee - it's a money grab.
OK, I think I understand the insurance now. Basically the money upfront is used to pay insurance for a year and the additional money you pay into the escrow each month is what is used as payment when that upfront money runs out. Are taxes basically the same way, will we owe taxes upfront? I didn't really understand that part from what you said in your previous post, sorry.
Taxes are a different story. Generally taxes are paid in arrears. I am paying my 2008 taxes in 2009. You may not owe any taxes at closing or you may owe a portion. I'd be surprised if they ask for an entire year's worth ox taxes at closing. The main reason that lenders want you to escrow is so that they are assured that your insurance and taxes get paid.
Looks like we'll close sometime this week just unsure of which day. I have a question about a few things. 1. Is it possible to paint a room two different colors on each wall without chair railing there to provide a divider. I mean you can use masking tape but it seems like there would be small parts unpainted or missed. I like the look of chair rail actually is it difficult to install or expensive to have somebody install? 2. There is a small water stain on the ceiling that we would like to get fixed. The two inspectors we used said the leak was properly repaired. I'm thinking that somebody with knowledge of drywall repair will be needed for this. Is this generally expensive? 3. There are hardwood floors in the house. What is the best way to go about buffing/staining them?
1. My son and daughter-in-law have done this. I think they simply paint the one color to a point above where the other color will go. They then tape straight across and paint the other color. 2. If it's just a small stain (more unsightly then anything else), get a can of Killz and spray over it (I assume it's white).
See, I knew there would be some ridiculously simple question to this answer. It is a small stain, I would say about the size of a tea saucer. Somebody else suggested Kilz but I would rather get it fixed. Thanks.
