U.S. CitiesCity-Data Forum Index
Covid-19 Information Page
Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 07-21-2010, 05:11 PM
 
65 posts, read 186,092 times
Reputation: 30

Advertisements

Hi, is there anyway to not pay escrow charges without putting 20% down payment. I talked to one bank and one credit union and they both said without 20% I would have to pay escrow charges.
Is this what everyone else has experienced too?
Reply With Quote Quick reply to this message

 
Old 07-21-2010, 06:15 PM
 
Location: New York
2,251 posts, read 4,457,585 times
Reputation: 1610
If you are looking not to pay taxes and insurance, there is no way you are going to get a loan for a home.

I wrote loans for 8 years. You have three options

1- Through conventional loans - you have a choice to include, or not to include your escrows with your payment. Though to get the best interest rate, requires putting down 20% or more and including your escrows. By not including your escrows with your payment, will result in a slightly higher interest rate. With putting 20% down excludes the PMI charges.

2 - Not everyone can afford the large down payment - to avoid the PMI and the 20% down payment. The borrower does one loan at 80% financing, and a 2nd loan at 10%. Requiring a 10% down payment.

Being in the business I'm in now - more people are in trouble with 1st and 2nd mortgages. I personally do not like this method because it will take you longer to develop equity in the property. Note years ago there were the 80/20 loans, I don't think they are around any longer.

3 - Honestly if it is an issue with the money, look into a FHA loan. You have to include escrows, there is PMI, which automatically drops off after five years. The thing I like best is the the down payment of 3.5%.

Having escrows included in your payment many people prefur, because it is easier to pay 1/12th every month than one lump sum payment yearly.

(But on the other hand - if you have a large mortgage, then you would want to pay your taxes and insurance by yourself. The money sitting in your escrow account gains interest, which you have to pay taxes on at the end of the year. I don't feel this is the case) .

My $00.02

..
Reply With Quote Quick reply to this message
 
Old 07-21-2010, 08:27 PM
 
673 posts, read 1,720,408 times
Reputation: 590
Quote:
Originally Posted by Modification Specialist View Post

3 - Honestly if it is an issue with the money, look into a FHA loan. You have to include escrows, there is PMI, which automatically drops off after five years.
Can you elaborate on this.... My understanding is that the first time you can ask to have your PMI removed is after 5 years..... however you must not have not more than a 78% loan-value-to-purchase price....

Based on a 3.5% downpayment on a 30 year mortgage (and with today's falling prices), I don't think 78% is possible if you only pay the minimum payment over the 5 years.

I don't think it just automatically drops off.

I hope I'm wrong.
Reply With Quote Quick reply to this message
 
Old 07-21-2010, 08:48 PM
 
11,636 posts, read 21,240,125 times
Reputation: 12198
Quote:
Originally Posted by Modification Specialist View Post
(But on the other hand - if you have a large mortgage, then you would want to pay your taxes and insurance by yourself. The money sitting in your escrow account gains interest, which you have to pay taxes on at the end of the year. I don't feel this is the case) .
..
The real reason to avoid having a bank pay your taxes and insurance is that the banks can make mistakes that can be nearly impossible to unravel. In the 1990s I had a mortgage on a house where the bank told me that my mortgage payment was increasing by $500 per month to bring my escrow account back into line. It turns out that the bank had made a tax payment on someone else's house and charged it to my escrow account. It took me six months to straighten it out. Since then I have always paid my own taxes/insurance.

Additionally, some jurisdictions give a discount for paying your taxes early. Banks never take advantage of those "early bird" plans.
Reply With Quote Quick reply to this message
 
Old 07-21-2010, 09:24 PM
 
Location: Suburban Chicago
163 posts, read 410,874 times
Reputation: 146
Quote:
Originally Posted by volk2k View Post
Can you elaborate on this.... My understanding is that the first time you can ask to have your PMI removed is after 5 years..... however you must not have not more than a 78% loan-value-to-purchase price....

Based on a 3.5% downpayment on a 30 year mortgage (and with today's falling prices), I don't think 78% is possible if you only pay the minimum payment over the 5 years.

I don't think it just automatically drops off.

I hope I'm wrong.
Having just filled out all the paperwork for my FHA loan application last night, and paying particular attention to the fine print regarding PMI, I can tell you you're right. Loans can qualify for PMI removal after five years of consecutive on time payments but the LTV must be 78% of the original loan amount or most recent appraisal, whichever is lower. Once you reach 78% the PMI should automatically drop off with FHA loans where an upfront mortgage premium has been paid. If the premium wasn't paid at the beginning of the loan then FHA requirements force you to pay PMI for the entire life of the loan regardless of LTV.

According to all my loan documents we should reach 78% LTV in twelve years after putting 3.5% down if we make the minimum monthly payments.
Reply With Quote Quick reply to this message
 
Old 07-21-2010, 10:19 PM
 
673 posts, read 1,720,408 times
Reputation: 590
Quote:
Originally Posted by thndrcloud View Post
Loans can qualify for PMI removal after five years of consecutive on time payments but the LTV must be 78% of the original loan amount or most recent appraisal, whichever is lower.
I think we need to clarify this statement since it can be taken a number of different ways... Your phrasing seems to imply that PMI can be removed after 5 years if a NEW appraisal (most recent) or orignal purchase price supports the 78% LTV.

My understanding is that no appraisal is done at 5 years, and the LTV is calculated against the ORIGINAL sale amount or the ORIGINAL appraisal...

This may be a little dated, but you may want to look into this from the HUD site:

"FHA will determine when a borrower has reached the 78% loan to value ratio based on the lower of the sales price or appraised value at origination."

http://www.hud.gov/offices/adm/hudcl...es/00-38ml.doc
Reply With Quote Quick reply to this message
 
Old 07-22-2010, 07:03 AM
 
65 posts, read 186,092 times
Reputation: 30
The reason I was trying to avoid paying escrow...is that I live in NY state and the property taxes here are 3.5%. So for a 200,000K home I end up paying $6500 in taxes. Thats how much I would have to cough up upfront. Instead I could be using that money towards a downpayment.
Reply With Quote Quick reply to this message
 
Old 07-22-2010, 07:40 AM
 
11,636 posts, read 21,240,125 times
Reputation: 12198
Quote:
Originally Posted by cooks2010 View Post
The reason I was trying to avoid paying escrow...is that I live in NY state and the property taxes here are 3.5%. So for a 200,000K home I end up paying $6500 in taxes. Thats how much I would have to cough up upfront. Instead I could be using that money towards a downpayment.
Well you have to pay it eventually. Will you have it when you have to pay it? My husband and I put away our tax/insurance money in a separate account on a monthly basis so that we have the money when it is due. As long as you do that you will be fine.
Reply With Quote Quick reply to this message
 
Old 07-22-2010, 07:59 AM
 
2,726 posts, read 4,585,883 times
Reputation: 2341
Quote:
Originally Posted by cooks2010 View Post
The reason I was trying to avoid paying escrow...is that I live in NY state and the property taxes here are 3.5%. So for a 200,000K home I end up paying $6500 in taxes. Thats how much I would have to cough up upfront. Instead I could be using that money towards a downpayment.
Are you sure you need to cough up the entire years worth of tax? At least here in Florida you are responsible only for the remainder of the year that you would be in the house. The rest is paid by the current owner. Of course, you would start saving monthly for the next cycle.
Reply With Quote Quick reply to this message
 
Old 07-22-2010, 09:14 AM
 
Location: Laguna Niguel, CA
768 posts, read 4,102,965 times
Reputation: 456
Quote:
Originally Posted by volk2k View Post
I think we need to clarify this statement since it can be taken a number of different ways... Your phrasing seems to imply that PMI can be removed after 5 years if a NEW appraisal (most recent) or orignal purchase price supports the 78% LTV.

My understanding is that no appraisal is done at 5 years, and the LTV is calculated against the ORIGINAL sale amount or the ORIGINAL appraisal...

This may be a little dated, but you may want to look into this from the HUD site:

"FHA will determine when a borrower has reached the 78% loan to value ratio based on the lower of the sales price or appraised value at origination."

http://www.hud.gov/offices/adm/hudcl...es/00-38ml.doc
volk found the correct information on FHA mortgage insurance - it can be removed after 5 years and when the loan-to-value gets to 78% of the value when the loan was originated.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Real Estate > Mortgages
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2020, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top