Mortgage Prepayments Question? (Dallas, West: hazard insurance, credit, loan)

[FriscoNewHome]

I am shopping for a mortgage loan and took a quote from 3 different Lenders.

Interest rate is same from all three lenders but the Prepayment amount is different from Lender to Lender.

first lender requires just 3 months of hazard insurance amount.
second lender requires 3 months of hazard insurance and 3 months country taxes.
third lender requires 3 X hazard insurance and 9 X county taxes.

What is the standard in Dallas? I am putting 10% down.

[nsumner]

There isn't a standard. I also think that you mean "prepaids" not "prepayment". This is the amount that goes into your escrow. It will always be your money not the lenders. Go with whatever you're comfortable with. I assume that it's new construction if one of the lenders is asking for 9 months of taxes. If there is too much money in the escrow account by the end of the year, the lender will send you a refund. They are required to keep only a certain amount.

Naima

[FalconheadWest]

Lenders ask for 1 full year of insurance plus 2-3 months. Then, since taxes are paid in arrears, they collect however many months have gone through the year plus an addditional 2-3 months. We are in May, so that would be 5+ 2 or 3 months. The seller credits you the first 5 months, and you pay the additional 2-3 months at closing as your costs. They need to make sure there's enough money in your escrow to actually pay the taxes at the end of the year. You will see it as one of your costs on their good faith estimate, but it's actually the seller paying from January until the time you close.

[dallas_cowboy]

I would not be worried about prepaids as this money is yours sitting in escrow account. So it will be paid out for your insurance and taxes. I had seen different months of tax prepaids almost on each quote I received from different lenders, but all were asking 1 year insurance.

[HockDad]

Originally Posted by dallas_cowboy

I would not be worried about prepaids as this money is yours sitting in escrow account. So it will be paid out for your insurance and taxes. I had seen different months of tax prepaids almost on each quote I received from different lenders, but all were asking 1 year insurance.

I would beg borrow or steal before I paid PMI or had to escrow my taxes. If you can get to 15-20% down (maybe borrow from a parent or sell a paid off car), they will waive the requirement. PMI is just throwing money away. Moreover, lenders will tell you that they will waive the requirement when you have 20%equity in the property, but it is never that easy.

[FalconheadWest]

Originally Posted by HockDad

I would beg borrow or steal before I paid PMI or had to escrow my taxes. If you can get to 15-20% down (maybe borrow from a parent or sell a paid off car), they will waive the requirement. PMI is just throwing money away. Moreover, lenders will tell you that they will waive the requirement when you have 20%equity in the property, but it is never that easy.

He's not talking about PMI. He's talking about his prepaid closing costs. To eliminate an escrow account, most lenders charge .25% on the rate. Many borrowers rather have someone else worry about their taxes and insurance getting paid and knowing it's done, than pay additional on the rate and have to remember dates.

It's personal preference. I have an investor who puts down more than 30% and does escrow because it's one less thing he has to worry about.

[dallas_cowboy]

Originally Posted by FalconheadWest

He's not talking about PMI. He's talking about his prepaid closing costs. To eliminate an escrow account, most lenders charge .25% on the rate. Many borrowers rather have someone else worry about their taxes and insurance getting paid and knowing it's done, than pay additional on the rate and have to remember dates.

It's personal preference. I have an investor who puts down more than 30% and does escrow because it's one less thing he has to worry about.

That's true. I also recently bought the home just like OP and I will pay 20% down payment. I asked the lender to waive escrow account. Most of the lenders tried to gimmick with interest rate and closing cost credit when asked to waive escrow though I am paying 20% down.... I agree that lender's charge extra points or increase rate by 1/8th to 1/4th of a point, but that's totally negotiable based on how flexible lender is to get your business.