Question about prepaid tax and ESCROW on new construction (insurance, property tax, credit)

[Nepenthe]

Here's the situation:

The property was dirt for most of the year. Property tax on the dirt was $55/month. Construction began in June. Closing is early October.

Property tax after improvement will be $330/month (I'm omitting the homestead exemption which will lower it about $25, for simplicity). Tax bill is paid in December, tax appraisal is done in February.

Just got a final estimate from my lender, and line 1004 (tax reserve) is $3,960 for twelve months of reserve. Twelve months seems excessive. There's a tax credit of $495, which is the builder giving me 9 months at $55/month back. And I understand I'm responsible for the tax bill of $660 in December of this year.

Bank/ESCROW gets $3,960 up front (12 month reserve)
Bank/ESCROW gets $330 for Dec. 2009 (first payment)
TOTAL is $3,960 + $330 = $4290 at the end of 2009

Bank/ESCROW pays $660 tax for 2009
RESULT is $4,290-$660 = $3,630 after paying 2009 tax
-------------------------
Bank/ESCROW gets $3,960 for Jan. 2010 through Dec. 2010
TOTAL is $3,630 + $3,960 = $7,590 at the end of 2010

Bank/ESCROW pays $3,960 tax for 2010
RESULT is $7,590 - $3,960 = $3,630 after paying 2010 tax

Is this right?? After paying the tax the Bank/ESCROW for 2010 still hangs onto $3,630 at the start of 2011? I'm just in sticker shock a little due to the extra nine months of property tax reserves required ($2,970 extra due at signing that I wasn't expecting). I was expecting three months.

If anything, I'd expect my prepaid to be $660, covering all of 2009 taxes. This would then leave them with $330 at the end of 2010 after paying 2010 taxes.

Thanks for any links or assistance in understanding!

[TimtheGuy]

Are you putting at least 20% down? If so, don't escrow for taxes and insurance. You can pay them on your own as they come due.

[Nepenthe]

8 to 10% down, closer to 8% if this holds.