A bit off topic but I have a question. The loan officer gave us an idea of how much our payments will be. She said she included mortgage, taxes and insurance. My question is...when it comes time to make a payment do we pay that entire amount to the mortgage company? Or do we only pay the mortgage and the others are paid separately?? Are they just trying to give me an idea how much the taxes/insurance will cost in the area so that I can put that in my budget too? TIA
It all goes to your mortgage company into what is called an Escrow. You could choose to pay them at different times but I would advise against it. This way you know that it is being taken care of and nothing is late.
Okay..I'm confused. I thought we have to choose our own home owner's insurance. Do we simply choose a company and then the mortgage company will forward the payment to them? Or does the mortgage company already have an insurance company picked out? As you can tell..I'm very new to all of this. Thanks for your help!
You choose the company and you make the first years payment to them. Then it is taken out of your escrow, and they pay it for you as it becomes due. I think that they prefer to do it this way to make sure that the home is properly insured. They will also ask you for the proof of insurance for their records (they did at my closing anyway).
One last question. I just wanted to make sure I have this right. I choose the company and pay for one year in full. Then the first year, I don't make any additional pymts for the homeowner's until the following year. Then once that year is up, the payments increase because I start paying for homeowner's again? I know..I'm probably making this harder than it actually is but I just want to make sure I understand exactly wha tyou are saying..Thank you so much for your help. I really appreciate it.
Thats ok. I had these questions too. Here is how it works. 1. You choose your own homeowners insurance company. 2. You pay to get the insurance started (I paid one year, they may offer you a different option) 3. Your mortgage insurance is then added into your escrow (an escrow is what a mortgage company uses to pay for homeowners and taxes this is included in your payment on top of your principal and interest payment) Your payment my not increase, but I think in most cases it does. When you get your Truth in Lending info from your mortgage company look it over carefully. My payment went up over 100.00 a month for escrow shortage. For some reason they thought that we only paid taxes once a year. Where I live we have a summer and a winter tax.
Here's what happens based on the closing papers I just got with a preapproval (and which matches what happened the last time I closed on my condo except for insurance.) At closing proof of adequate insurance is required (and the loan documents spell out maximum deductables, rating of the insurance company, and required notice terms to be adequate). Either proof from the insurance company that the policy is already paid for, or payment of the first year's premium at closing. Payment in to the escrow account of 1/6 (2 months) of the estimated cost for NEXT year's. Ongoing mortgage payments include an estimated 1/12 of the cost of next year's insurance premium. The insurance company get's paid by the mortgage servicer out of the escrow account. That is factored in to your payments starting with the first payment. The same thing happens with property taxes, (with the added complication of some allocation of taxes between seller and buyer during mid-year). In all cases you pay in to the escrow account in advance so the money is there to pay the taxes when due, and insurance when due.
Same here. We made an offer on a house and it was accepted. When we got the "good faith estimate", the principle on the loan was $732.00/month. But when they added the taxes, and homeowners insurance, it was up to $910.00/month. But this was based on their estimates. The mortgage company is out of Florida and the taxes there are a lot higher than they are in Louisiana, where I live. Taxes here are about half of what I was quoted and my homeowners insurance is only about $15 dollars a month higher than what I pay now in renters' insurance. It definitely pays to shop for homeowners' insurance and if your auto insurance provider also has homeowners, you can get a discount on it. Hope this helps you out.
CF most people's mortgages are broken down into 4 seperate catagories: P.I.T.I. they mean: P Principle- this is the portion of your payment that goes to pay down your principle on your mortgage I Interest- this is the portion of your payment that pays the interest on your mortgage. This amount will be the largest part of your monthly payment at the beginning and will shrink as you pay down your principle T Taxes- this is the portion of your payment that is escrowed with the mortgage co. to pay your property taxes each year. I Insurance- this is the portion that goes to pay your Home Owner's Insurance. Home Owners Insurance(HOI) is paid 1 year in advance and then the escrow accumulates to pay next years HOI. So what will happen is either you will purchase your HOI policy and make the first year's payment when you get the policy or they will pay the policy at closing. You will also pay 2 months escrow on your HOI at the closing since your first mortgage payment will not be until the first of the month after the month you close in, i.e. if you close in July, your first mortgage payment won't be due until September. Hope this helps fla-tan
When you "shop" for homeower's insurance you can reduce your costs by increasing your deductible. Find out what the maximum deductible your bank will allow. Remember, saving $$ this way may come back to bite you if you have a claim and have to pay out a lot more $$ then.Also, besides auto discounts if you are with the same company, you can get extra discounts for alarm systems, smoke detectors, and depending on where you live, hurricane shutters.
