Warning to new home buyers-Mortgage Wells Fargo (Austin, Pittsburg: foreclosure, insurance)

[PittsburghAustin]

Just purchased my first house in TX last month from DR Horton. Monthly payment was $974 for everything but HOA. Of course mortgage was sold to those wonderful people at Wells Fargo. Get payment statement from them for first payment on the new house, payment is $994. I call and asked what happened, I didn't even make a payment yet but it was all ready increased. Woman on the other end says it is because we don't know what the taxes are going to be yet. I guess the local DR Horton office didn't have as good of an idea on what the taxes might be than a bank in CA.
I said if you don't know, they might be lower why not wait till you know for sure. Answer, don't worry sir we will have it figured out in a couple of months. Just a grab for more free money to use in the escrow accounts.
I can afford it and my mortgage isn't that big, but I worry about some young or old couple that have a large mortgage and might be at the upper limit of what they can pay.
But what makes me mad is the stupid reason.

[hound 109]

Originally Posted by PittsburghAustin

Just purchased my first house in TX last month from DR Horton. Monthly payment was $974 for everything but HOA. Of course mortgage was sold to those wonderful people at Wells Fargo. Get payment statement from them for first payment on the new house, payment is $994. I call and asked what happened, I didn't even make a payment yet but it was all ready increased. Woman on the other end says it is because we don't know what the taxes are going to be yet. I guess the local DR Horton office didn't have as good of an idea on what the taxes might be than a bank in CA.
I said if you don't know, they might be lower why not wait till you know for sure. Answer, don't worry sir we will have it figured out in a couple of months. Just a grab for more free money to use in the escrow accounts.
I can afford it and my mortgage isn't that big, but I worry about some young or old couple that have a large mortgage and might be at the upper limit of what they can pay.
But what makes me mad is the stupid reason.

Makes sense to me.

The lender doesn't want you to be upside down on your escrow at year end.....then you'd be doubling up to catch up. (which caused some folks to go into foreclosure elsewhere).

& it was the Title company where you closed (& where DR Horton directed you to close) that came up with the $974 number. Maybe your beef is with them?

[atxcio]

If you can get a mortgage without escrow, and are financially responsible enough to pay your own tax & insurance bills (they are big), you should absolutely do that. Why let the mortgage company earn interest on your thousands in taxes and insurance payments before they are even due? Like many things in the mortgage industry, the escrow system is laden with extra profit for someone other than you.

I don't know how hard it is to get a no-escrow mortgage these days, but a few years ago it cost about 1/4 of a point on my last home purchase. Years before that, it was free if you had 20% equity. You could just request it.

[centralaustinite]

To avoid escrow you have to have 20% equity and you have to ask. Some times you have to pay an "escrow waiver fee" which is totally BS but I have paid it. Most people do not ask and you have to have discipline, miss your tax payment (which in Travis County is generally a substantial chunk of change) and you can lose your house!

But if you have escrow, they will usually err on the side of caution if they do not have the tax bill in front of them.

[CptnRn]

Originally Posted by PittsburghAustin

Just purchased my first house in TX last month from DR Horton. Monthly payment was $974 for everything but HOA. Of course mortgage was sold to those wonderful people at Wells Fargo. Get payment statement from them for first payment on the new house, payment is $994. I call and asked what happened, I didn't even make a payment yet but it was all ready increased. Woman on the other end says it is because we don't know what the taxes are going to be yet. I guess the local DR Horton office didn't have as good of an idea on what the taxes might be than a bank in CA.
I said if you don't know, they might be lower why not wait till you know for sure. Answer, don't worry sir we will have it figured out in a couple of months. Just a grab for more free money to use in the escrow accounts.
I can afford it and my mortgage isn't that big, but I worry about some young or old couple that have a large mortgage and might be at the upper limit of what they can pay.
But what makes me mad is the stupid reason.

$20 ?

[phone man]

Just wait until next year when you realize you are paying taxes this year on the undeveloped lot your house currently sits on. Next year the taxes will include the land and the new home and you will not be happy about your new payment.

[woodinvilleguy]

Originally Posted by atxcio

If you can get a mortgage without escrow, and are financially responsible enough to pay your own tax & insurance bills (they are big), you should absolutely do that. Why let the mortgage company earn interest on your thousands in taxes and insurance payments before they are even due? Like many things in the mortgage industry, the escrow system is laden with extra profit for someone other than you.

I don't know how hard it is to get a no-escrow mortgage these days, but a few years ago it cost about 1/4 of a point on my last home purchase. Years before that, it was free if you had 20% equity. You could just request it.

You get interest? I'd agree with you before but now you get so little interest I think it is a wash.

I have a no escrow mortgage when I refi'ed I think you only needed >20% down. The rate wasn't any higher for me.

[RooCeleste]

We just refinanced our 4-year-old house and we have never escrowed on it. I don't believe they charged us anything for no escrow - if they did, it was so miniscule that it wasn't even noticeable. Initially, the mortgage broker said the lender would not like doing it, but I insisted and told her to check our tax payment history and that if they didn't want to do it, we'd go elsewhere for the refinance. They did it, and ended up not even wanting 75% of our assets, just going with one bank account! Then it was quickly sold to Wells Fargo and everything has been peaches since.

And yes, I agree with PhoneMan in that your tax bill for the first year the house is actually complete on your lot is a shocker!! Ours jumped from about $2500 to almost $7000!!

[pmiranda]

You can definitely get no-escrow, and I've done that on a couple refi's and 1 new loan over the last 10 years. Sometimes they charge but it's completely worth it to me.
Say you have a nice, round $400k loan and property value. 1/4 point is $1000. Tax rate in my neighborhood is just over 2.4%, so $9,600. I have a savings account that still gets 0.75%, so it would gain $72/yr, and if you invest you can get several times that. Worst case, the savings account made up the cost in 14 years and you never had to worry about them paying the taxes late.