Yay or Nay

Currently do, but due to the cost of the new home, I'm considering paying the taxes myself as it will leave my currently monthly payment the way it is and I can pay the taxes once a year. Thoughts?

I thought that having an escrow account for taxes and insurance was a requirement by the lender.

You can opt out of an escrow account if you have 20% equity in the home. Otherwise it is required until you do.

Do you have 80% or less loan to value ration on the first lien? if so you have the choice.

I know the prevailing option here is to waive escrow but that typically has a cost (0.25% in discount). If you plan to put aside the required amount each month you have to put it in something guaranteed so you'll really not earn any interest.

Most people who make the same income each month would probably be better off to include in their payment rather than get a $6K tax bill at Christmas.

In the thousand or so years I've been in mortgage I've probably gotten 2 or 3 calls per year from borrowers who have not set aside enough and get an unhappy dear john your payment is going up $500/month or you can send us $6K today letter.

I've done both, put aside the money each month, on my own, for tax/insurance payments that come once a year in my first 2 homes. Now I lump it into the escrow account as part of the normal monthly payment. Net-net it's all the same, just depends on what you are comfortable with and if you are going to earn any real interest by setting it aside yourself.

Note: Make sure there are no drawbacks to doing your own escrow, like rate difference, or fees. Shouldn't be, but I think putting 20% down is the key factor, as others have mentioned.

There is a fee and jj noted it. .25% of the loan so 250.00 per 100k. We usually build it in the rate but you can pay it at closing

SteveBott said:

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There is a fee and jj noted it. .25% of the loan so 250.00 per 100k. We usually build it in the rate but you can pay it at closing

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Good catch, with that fee, I'd pass. I didn't have a fee, but I'll probably just let the lender escrow from now on, to be honest.

You were charged the fee just didn't see it. It's been around since I got into mortgage.

I tell people to close with escrow, let the lender pay the taxes and then opt out next year and avoid the fee

SteveBott said:

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You were charged the fee just didn't see it. It's been around since I got into mortgage.

I tell people to close with escrow, let the lender pay the taxes and then opt out next year and avoid the fee

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Thanks. Are you saying that I likely didn't notice it on my closing papers, or that the fee was hidden/spread across other fees? I worked for my lender/bank for all 3 purchases, which had perks, so I never thought to look back at the closing costs of all 3 to see what was different.

You are probably correct, it's just that the escrow/non-escrow question was posed to me as a personal preference, never a "if you do that, it will cost this..."

I know I'm correct not think so. Both Fannie and Freddie charge the fee. Again been in mortgage 14 years and it's always been there.

Edit: if your bank funded and kept the loans in house then they can elect to not charge the fee. They don't have to sell it if the terms are 15 years or less

We don't charge a waiver fee on loans we put on the bank's balance sheet but as Steve said it's a standard Freddie /Fannie charge on agency loans.

I pay my own. When I escrowed lender held back too much and had a $3,000 cushion, which was ridiculous. Not too hard to take tax + insurance bill and divide by 12, but they always seem to take too much.

Just to add, the determining factor in if you can waive escrow or not is by the first lien loan to value being 80% not the down payment.

So, in other words, if you do a 80/10/10 which means 80% first lien, 10% second lien and 10% down payment you would have the choice to waive escrow or not even thought you are putting down 20%.

Jay@AgsReward.com said:

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Just to add, the determining factor in if you can waive escrow or not is by the first lien loan to value being 80% not the down payment.

So, in other words, if you do a 80/10/10 which means 80% first lien, 10% second lien and 10% down payment you would have the choice to waive escrow or not even thought you are putting down 20%.

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Could you PM me about an 80-10-10 loan. I've read about them but not 100% clear on the application process.

I wasn't talking about you rich guys.

PM'ed Katie.

Jay- I applied online about a week ago asking about rates as we are looking to buy in the next 30-60 but still have not heard back from anyone. Anything you can do?

JBLHAG03 said:

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I pay my own. When I escrowed lender held back too much and had a $3,000 cushion, which was ridiculous. Not too hard to take tax + insurance bill and divide by 12, but they always seem to take too much.

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It wasn't an accident--they were ripping you off on purpose. I know that the CFPB was up WFC's ass about doing this and figured there were more doing it alongside them. Wells did it to me so I no longer escrow.

Eric,

Assuming you are the Eric I think you are, I saw that you had started an application but a full application never came through to me. I just checked it again. Not sure what happened there. So, if you could log back on and hit submit again. Or, just give me a call on my cell over the weekend.

I have an escrow account bc the bank wanted to charge me a fee to not have it. This is a Frannie/FrEddie requirement?

This chaps my ass so bad they want to charge you a fee to NOT perform a service. I have to pay them to Not do something?! It is the most screwed up idea and why the banks and the feds totally suck ass.

I was told I'd still have to pay the fee, you're telling me I can opt out at no cost?

AlaskanAg99 said:

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I have an escrow account bc the bank wanted to charge me a fee to not have it. This is a Frannie/FrEddie requirement?

This chaps my ass so bad they want to charge you a fee to NOT perform a service. I have to pay them to Not do something?! It is the most screwed up idea and why the banks and the feds totally suck ass.

I was told I'd still have to pay the fee, you're telling me I can opt out at no cost?

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There is a financial risk for the lender to allow the buyer to cover the taxes and insurance on their own. In the event you fail to do so, the collateral can be subject to additional liens, and advances will have to be made on your behalf.

Alan Pavio said:

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AlaskanAg99 said:

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I have an escrow account bc the bank wanted to charge me a fee to not have it. This is a Frannie/FrEddie requirement?

This chaps my ass so bad they want to charge you a fee to NOT perform a service. I have to pay them to Not do something?! It is the most screwed up idea and why the banks and the feds totally suck ass.

I was told I'd still have to pay the fee, you're telling me I can opt out at no cost?

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There is a financial risk for the lender to allow the buyer to cover the taxes and insurance on their own. In the event you fail to do so, the collateral can be subject to additional liens, and advances will have to be made on your behalf.

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I bought a house in 2011 and wasn't subject to this. 4 hears later it's suddenly a big deal? I call BS, it's just another way the banking lobby is pulling $ from borrowers. I have no PMI on my house either.

you were subject to it, but your lender may have covered it.

Like the previous poster said, it's about risk, which is pretty much all an underwriter cares about in the lending world.

If it makes you feel better, think about the reduced rate you pay when escrowing as a perk for making the lender more comfortable with the loan.