Be Prepared to Pay Your Property Taxes in Escrow

This is the time of year when the 1st installment of property taxes are due. Their due date is November 1st and their “late” date December 10th. If you’re like me, you want to hang on to your money as long as possible, so a lot of people wait until close to the late date to pay their taxes. If you’re closing around this time, and especially on or after 11/1, the lender will require that you pay them. After all, they are due.

It is in September that I start giving my clients a “heads up” to be prepared for this. We all plan differently and our debt management can be very fine. Generally, here are your options, but some may depend on when you expect to close and when you naturally pay your taxes to the county:

1. You can cut a check for them in escrow.
2. Value-permitting, you can roll them into the loan amount so that you don’t have to pay them out of pocket.
3. You can pay them online to the county via credit card (I think there’s a small charge for this), but PRINT the receipt and keep a copy!

The main concern is that the escrow officer/title company is able to verify that they have been paid. The worst situation for you to be in is if you write a check and mail it off to the county. It’s somewhere in the system, but perhaps it takes the county a few weeks to register it in the system. If you need to close between now and that time, and since the escrow officer is unable to verify they’ve been paid, you will have to cut another check for the taxes. You will end up being reimbursed at some point down the line, but we’re talking about a bureaucracy here, and everything bureaucratic takes a long time. And that also means you have to assure you have the money for both payments in your checking account.

Just a heads up! Talk to your lender/broker about the timing and strategies.

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Published in:  on October 22, 2009 at 9:14 am Leave a Comment

Purchasing a Home with a “Bonus Room”

I’m seeing some listings that tout a “bonus room,” suggesting that you get an extra room included in the purchase price. What you need to know is that this is another way of saying that the addition (or conversion) was unpermitted, meaning that the previous homeowner did not go through the proper channels or permits through the county.

If you’re going to buy a home that has a bonus room, make sure you run this by your lender immediately. Not every bank will lend on a home with unpermitted additions or conversions. In fact, I only know of one that does not have a problem with it (and that’s one out of MANY), which also means we’re subject to their interest rates and turntimes.

This particular lender requires the unpermitted addition or conversion to be addressed by the appraiser, commenting that “everything was done in a workmanlike fashion and the improvements do not have an adverse effect on the property or pose a liability.” So this may cause an additional hiccup in that the appraiser needs to be on board. With the new HVCC law, there isn’t much we can guarantee anymore.

Published in:  on October 20, 2009 at 8:45 am Leave a Comment

Getting Prequalified versus Getting Preapproved, Part 2 of 2

After your initial conversation about prequalifying and after determining what you feel comfortable with as your “max purchase price,” it is strongly recommended, if not necessary, that you get preapproved for a loan.  This is not just getting credit-approved, like some banks like to call it.

In a preapproval, you go through the entire loan process.  You complete and submit an application, your credit report gets pulled, and your complete income and asset profiles are reviewed and documented.  This full loan package then gets submitted to a lender for an underwriter to review and either approve, suspend, or deny.  If we receive a loan preapproval from the underwriter, we will be issued a written commitment letter from the bank.  This will state that you as a buyer are preapproved to purchase a home up to x amount with a max loan amount of x.  The preapproval will reflect the conditions of the loan, usually pertaining to property (fully executed purchase agreement, preliminary title report and appraisal, among a few other standard conditions).

At this point, you will be armed and ready with this letter to make offers, showing the sellers that you have a loan from a bank backing up your offer.

It is also a good idea to go through the preapproval process before looking at homes because you get to take care of the financial aspect ahead of time, without scrambling and rushing to take care of it while you’re trying to deal with the details of the home situation.  Trust me, you’ll have enough to deal with on that end; it will be nice to take care of this ahead of time, while you can do it so that you will feel totally confident in your decision to buy, both practically and emotionally, and without feeling rushed.

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Published in:  on October 7, 2009 at 10:20 am Leave a Comment

Getting Prequalified versus Getting Preapproved, Part 1 of 2

It is much better and much more important to get preapproved.  Let me start out with the details of a prequalification first.  The first thing you are going to do when you start thinking about buying a home is to call a bank or a mortgage broker to see what you can afford and what you can qualify for.  If you were to make this call to me, we would start out with an initial conversation about your goals, your knowledge of the financial aspect of homeownership (if any), and your expectations.  At this point, I would then ask you some financial profile-related questions, such as:

  • What is your gross income?
  • What sort of a down payment do you currently have and/or do you expect to receive a gift from family to contribute towards the down payment?
  • What are your other minimum payment liabilities (car loans, student loans, credit cards…)?
  • Do you know your credit score or are you confident you have good credit?

After answering these questions, I can run some preliminary qualifying numbers to give you an idea of your total monthly payment responsibility and the max you would qualify for.  It is important for you to digest this information carefully: what a bank tells you that you may qualify for will not always be what you will be comfortable paying.  Only you can determine what you can handle.

This is the prequalification.  Essentially, you have verbally given me information, and based on that information, I ran some numbers for you.

A preapproval goes two steps further.  These two steps are crucial to your negotiating power in putting offers on homes.  I will explain how a preappoval differs from a prequalification in an upcoming post.

Published in:  on October 5, 2009 at 9:50 am Leave a Comment