Escrow advice and general financing for newbie

17 years ago

Hi there,

First time buyer here looking for advice from this great community. I have some questions about financing. I am shopping around for a first time home loan and here are the details.

1. The property I have put an offer on is $377,000.00.

2. I am planning on putting down 20% and financing about $301,600.

3. This will be my primary residance for 5-10 years if all goes well.

4. I have excellent credit in the high 700s to low 800s (802 , 806 , 777) from three credit reporting agencies.

5. In my newbieness, I am at the momemnt either considering 30 year fixed or the 30 year bi weekly type of loans.

6. I am buying a house in North Andover , Massachusetts.

Here are my questions:

1. I have noticed that alot of the mortgages i have been looking at include prepaid escrowed closing costs; a friend told me that with my credit I shouldnt have to pay those to the lender for escrow. And he told me to avoid escrow in general. In my situation is this something that I could negotiate with lenders or is this pretty standard stuff that is expected. The escrowed items i am mainly aware of are:

a. One year of hazard insurance

b. Anywhere between 2-5 motnhs of property taxes.

All being equal , I would prefer that even if these costs have to be in place for the closing that I would prefer paying them myself and just providing documentation that they are indeed paid. Are they required and if so how would i negotiate me paying the costs myself instead of having them put in escrow?

2. Anyone have any further advice when negotiating with lenders and specifically what I should negotiate given that I somehow feel I am entitled to some payoff for having above average credit?

thanks in advance.

Sort by:Oldest

Comments (8)

mariend
17 years ago
Make sure you do not have a early payoff penalty. (In writing) Deal with your bank, credit union or savings and loans. Remember in shoping around, each time they pull a credit report it counts against you.
Get everything in writing. I would prefer a fixed rate, possibly 15 years. I believe you can pay some fees out of pocket, but your loan officer can tell you that, not your RE agent. There are certin fees the seller pays and certain fees the buyer pays. Find out ahead of time who is required to pay what.
0
triciae
17 years ago
fruitypebble,

With a 20% down payment, you should be able to pay real estate taxes & Home Owner's Insurance directly & not through an escrow account. Just tell your lender that's what you'd like to do. It's quite common today.

If you were putting less than 20% down, the PMI companies require taxes & insurance to be escrowed.

You may run into a few lenders that always require an escrow account but they're not the majority.

Your credit score should get you a lender's best rate.

Tricia
0
Related Professionals
Arvada Architects & Building Designers · New River Architects & Building Designers · Pembroke Architects & Building Designers · Yeadon Architects & Building Designers · Chillicothe General Contractors · Lakewood General Contractors · Markham General Contractors · Norman General Contractors · North Lauderdale General Contractors · Overlea General Contractors · Prichard General Contractors · Williamstown General Contractors · Wyomissing General Contractors · Kennesaw Home Stagers · Ogden Interior Designers & Decorators
rrah
17 years ago
Lenders require that the first years HO insurance be paid in full prior to closing. That's a different issue than escrowing for insurance and taxes. With 20% down many lenders will not require an escrow account.
0
jane_d
17 years ago
In response to the above advice-

Early payoff penalties are outright illegal in Mass. So if they do try to write one in, it's an especially bad sign.

Getting your credit checked repeatedly can lower your score, but several lenders have told me you have a 2-week window before that's a problem. That is, if you do all of your shopping around within two weeks you should be fine, but if your credit is checked repeatedly over a longer time-span than that, it will start to lower your score. One good tactic is to ask the first place for a printed copy of your report, then take that to the next place. Some lenders will accept your copy and some won't, but it helps lower your number of credit checks.

Unless you are a finance specialist or have a very solid understanding of your investment strategies, adjustable rate mortgages can be disasterous for first timers. I have come across lenders who try to convince you it's a good idea since there's no way you'll still be living in the same place in 5 years anyhow. Well, that's where so many of these forclosures are coming from. I second the advice to go for a fixed rate.

Like tricia said, 20% down is the magic number that overcomes a lot of issues. With your credit and 20% down, it's not unreasonbable to ask for it if you want it. (You won't always get it, but it's reasonable to ask.)

Finally, there has been a relative tidal wave of lenders getting shut down in your area recently. Do an extra google search or two just to make sure the place that seems to have the best terms doesn't also have a court case against it in the news...

You sound well prepared, and I wish you the best of luck!

Jane
0
berniek
17 years ago
Last August (2006) changes were made to the old FICO scoring model. Under the new system any mortgage or auto related inquiries in the most recent 45 days are scored as just one inquiry. Under the old model it was 14 days. This means you can take your time to make a mortgage decision and allow your lender to provide the necessary documentation so you can do a proper evaluation.
Some lenders will charge a .25 point NOT to escrow, check with your lender about their policy.
0
pamghatten
17 years ago
Just an FYI .. even if the lender "waives" the escrow requirement for taxes and insurance, you will be required to reimburse the seller at closing for any taxes they have prepaid for the year (if they do it that way in MA) from the closing date.

And as someone else mentioned, a full years insurance is required to be prepaid whether you escrow or not.

A bi-weekly mortgage is a gimmick more than anything else, you can achieve the same thing by making an extra mortgage payment every year without having to pay the lender bi-weekly.
0
johnmari
17 years ago
What pamghatten said about bi-weeklies. What we did was to divide an extra 13th payment by 12 and add that amount to each mortgage payment, so we didn't have to cough up another two grand all at once. I noted on the check "$XX.XX to principal". Never had a problem with it not getting to where it was supposed to be. I was and am chicken - we went 30 year fixed on this one and we'll go 30 year fixed on the next. It is a big part of my comfort zone to have that predictability and consistency. I won't take risks with the roof over my head!
0
mnk716
17 years ago
agree with everyone. if you are putting 20% or more down you are not required to escrow.

however i like the fact it is the banks responsibility to make sure your taxes and HO are paid when they are due. the bank has to pay you interest on the escrow.

the opposite is you may be able to earn more at a high interest savings account for your taxes and HO. its up to you.

dont go with the bi-weekly. it is ridiculis you have to pay a fee and sometimes a monthly charge for the "benefit" of bi-weekly payments. just make an extra payment in decemeber or divide it by 12 and add it to your monthly payment.

congrats on the house.
0