Hazard Insurance (loan, escrow, property tax, premium)

[darkblue]

1 - What is hazard insurance premium under 'items required by lender to be paid in advance'
2 - what is 3 months hazard insurance premiums under 'reserves deposited with lender'
3 - hazard insurance also in 'estimated total monthly payments'

Since we are paying towards closing costs (includes first two mentioned), dont we need to pay hazard insurance for the total amount we paid in the first two options mentioned above - whatever months it will come upto

[renriq02]

Paid in Advance will go into your escrow account...and for the year.

1. You pay for the year so the lender knows your house is insurable throughout the year...if the house burns down then they will get paid.
2. They collect 2-3months because there are borrowers who forget to pay/dont like to pay, and if the insurance prices rise next year...you will be covered.
3. You will be paying it monthly, and it will go into your escrow balance. (just like your property taxes) It is easier to collect a monthly amount...then asking you to pay the whole bill at once. One of the myths that ppl have is that lenders collect interest on your escrow balance. This is 'illegal' if they dont have YOUR permission to do so. This will be one of the documents you will sign at closing....usually they dont collect interest.

Originally Posted by darkblue

1 - What is hazard insurance premium under 'items required by lender to be paid in advance'
2 - what is 3 months hazard insurance premiums under 'reserves deposited with lender'
3 - hazard insurance also in 'estimated total monthly payments'

Since we are paying towards closing costs (includes first two mentioned), dont we need to pay hazard insurance for the total amount we paid in the first two options mentioned above - whatever months it will come upto

[darkblue]

Thank you very much banker

What is escrow account?

and one final question for tonight

How do you manage to answer to each and every question on this forum?Dont you sleep at all?

[Briolat21]

Escrow (imho) is evil.

They collect your money (usually for insurance and taxes) each month as part of your house payment. They set it aside in a little account, where presumably it generates interest (which should not go to your lender!), and then when the taxes/insurance bill comes - it is paid out of escrow.

The problem I have with this - is that it doesn't allow you to manage your own money.

Let's say your MORTGAGE payment (P+I) is $1500/month. Your taxes are $450, your Homeowner's insurance is $50. Your total payment due each month would be $2000.

Let's say this month - you had an emergency - for whatever reason (major car repair, unexpected Dr's bill, whatever) you can easily make the house payment ($1500), - but you're $300 short on the total expected ($2000). They would consider you in default of the loan. Even though you paid them $1700, more than paying your principal and interest - since they were expecting $2000 -- you're now in default.

Even though your tax bill isn't due for another 3 months!!!

I don't like that. I want to be able to control my monetary flows, I don't want them doing it for me.

However, the caveat I have, is that most people I work with/know -- all very educated, intelligent, people - have escrow and don't think another thought about it.

Me - I'm making damn sure we satisfy my lenders requirements to not have escrow at all.

[galore]

Originally Posted by Briolat21

The problem I have with this - is that it doesn't allow you to manage your own money.

...

Let's say this month - you had an emergency - for whatever reason (major car repair, unexpected Dr's bill, whatever) you can easily make the house payment ($1500), - but you're $300 short on the total expected ($2000). They would consider you in default of the loan. Even though you paid them $1700, more than paying your principal and interest - since they were expecting $2000 -- you're now in default.

Uh. You made a good point FOR escrow.

If you are that financially irresponsible to have a $1500 monthly mortgage payment and NO cash reserve making you $300 short, well, then you shouldn't be allowed to manage money that essentially protects the lender (who lent you a LOT of money).

I boggles the mind that there is a situation where somebody has a $1500 mortgage but can run $300 short of cash?! What's in that person's checking account? $250? LOL!

[golfgal]

One clarification, your hazard insurance, more commonly known as homeowner's insurance, does not get paid to your mortgage company in the event of a loss. Depending on the size of the loss it gets paid directly to you. If the loss is over a set dollar amount which varies by state, the check is sent to you and is written to you AND your mortgage company. You then need them to endorse the check and send it back to you (don't endorse the check until the lender has done so). What you do with that check is then up to you but you are obviously still responsible for your mortgage payments.

The vast majority of people DO escrow their taxes and insurance. While I can see Briolat21's point, most people don't think that way and prefer that those particular bills just be paid out of your escrow account. Quite honestly, the ones that don't escrow, in my experience, are the ones falling behind on their insurance payments on a regular basis.

Also, your question #3 tells me you haven't spoken to your insurance company yet and gotten a quote on your homeowners insurance. Once you do that and they send what is called a binder over to your mortgage company they will have an exact figure and will be able to tell you exactly what your monthly payment will be. Usually mortgage companies err on the high side for estimates.

[jeffselan]

You may avoid escrow by having a very good loan to value ( Less than 80% ) and a higher rate ( an escrow waiver fee ) . I'm sure other banks might have other policies.

[Karla with a K]

We handle our own escrow, after years in the industry I have seen to many "slip through the cracks"
We were 70/30 ltv and did not have to pay a fee not to escrow
lol they tried but as I tell people all the time "great credit does the talking"
I simply told them I have a 800+ credit score and 30% down I am gold, you need me more than I need you so If you don't want to do this there are many who will"

As jeff said a lot will be determined by the type of loan.

[Karla with a K]

heads up to the poster that gave me a red dot saying "off topic you can pat yourself on the back elsewhere"


I have spent 30 years helping folks get their debt in order and was showing folks how you can use good credit to their benefit.
this is not off topic.

[renriq02]

Escrow waiver fee is 0.25 in discount points.
It can be a lot of money with a large loan amount.
For a 200k loan amount it is 500 bucks!

They can waive the escrow at 100% by doing the 80/20, but the fee is still involved.

County can foreclose on your home if you dont pay your property taxes.....and the County automatically becomes 1st lien holder!

Originally Posted by jeffselan

You may avoid escrow by having a very good loan to value ( Less than 80% ) and a higher rate ( an escrow waiver fee ) . I'm sure other banks might have other policies.