So this happened to my friend. It's not your loan (as long as you have fixed interest rate) the loan itself is the same price. It's your escrow. Your taxes and insurance are estimated. If the taxes are raised and cost more than estimated you end up owing the difference. They try to offset this by having extra funds from closing held in your escrow account, but sometimes the taxes go up by way more than anticipated. 🤷♀️ Hope that helps
Still, she should have warner Veronica that this might happen. She didn't explain it at all to her in the beginning, ergo Veronica should not have to pay the $5,000. That, or Veronica could sue for non-disclosure. Either way, they screwed her over.
When our taxes or homeowners insurance change, and something needs to be fixed, typically there is communication between the entities, and we get a notification. Maybe that is legally required in our state but not all states? Also, we have monthly data on what's going into and out of our escrow every month ON our mortgage statement. Doesnt everyone have that? Or no?😮
So she’s not giving an explanation and she is treating the customer like a crap. In real life someone might go to jail 😂 tbh customer service sometimes they forget that they are humans and they will be put in a similar position somewhere else. So they should treat people carefully to get the same good karma elsewhere
It is IMPERATIVE to make sure you get all the numbers before closing. It is crucial to know what the current owner has been paying in taxes, and as important how long they have lived there. In Michigan, we have the Headlee Amendment which caps the rate of taxation to no more than the rate of inflation. So, as a new owner you pay that tax rate from your escrow the first year. Then the municipality reassess your taxable rate and you must then pay the full new rate from your escrow account. We had an issue where the prior owner was 90 years old and had been in the house since it was built in 1952. So DECADES of taxes being capped (since 1978). Our 2nd year there, our taxes skyrocketed and being on fixed incomes, we were forced to move out of the city and into a manufactured home park. Embarrassing to admit, but ... learn from us.
This had nothing to do with closing though. If you're a homeowner. You know your tax are reassessed every year at a certain time of year. This is also true for homeowners insurance being renewed. As your numbers change so does your escrow if you have one. This is why they have her 2 options, pay the money on a lump sum payment or increase the monthly mortgage payment.
Similar issue here, my grandma had a house built in 77 and was capped, when she passed we had to sell it but the process took 2 years. The taxes that 2nd year were jaw dropping.
Yes Stephanie, The issue is the increase. When my insurance hadn’t changed and the property taxes changed a whole $200 for the whole year, somehow there is several thousand dollars in escrow shortage, pushing the monthly up. Our payment has about doubled in eight years. It doesn’t make sense
@@lynnmoss2127your escrow is based on the prior years payments.for ex, if you bought the house from someone with a tax exemption or discount, you’re first years payments are going to be way lower than what they should be because the amount of taxes that you would owe is not known when the contract is first signed. That’s why new home buyers get fucked on their 2nd year. Banks aren’t stealing from you, but loan officers should be educational about this type of stuff. Can’t tell you how many angry calls I’ve had over this lmao. I completely get peoples frustrations but that’s how it is ¯\_(ツ)_/¯
@xandercrew6088 Not all of the time, but depending on your area, it can be significant. There are several variables that impact that, such as crime, weather, etc, for insurance. For taxes, you would want to pay attention to city council and state voting, etc.
@srki22 Most people have their taxes and mortgage rolled into one payment. A portion of what you pay goes into an escrow account to pay your taxes each year. So if your taxes increase, the overall payment would also increase to make sure the escrow account has enough in it yearly to pay the taxes due.
Remember the HOA fees they never tell you about when looking for a home! I always start by determining the HOA fees amount and then go from there because that's not fixed money; you'll owe it over time as it possibly increases, along with insurance and property taxes. Many people have lost their homes due to rising HOA fees. It's a terrible injustice.
I think when you put 10% or less for down payment, they mandate an escrow account where the bank withholds an amount monthly for your property tax and home insurance. We were in that cycle before for a couple of years and one year, they forgot to pay our property tax and all heck broke loose! We refinanced and dropped the escrow account and paid the tax and insurance ourselves!
Unfortunately they are estimated based last year’s taxes and insurance. Our insurance went up about 50% because of our areas wind and hail damage, and not just home owners insurance but auto insurance.
When I sold my last house the mortgage company sent keep a check for $4k because they over charged me in escrow. Had I never sold the house they would keep me over paying. As a result, I don't pay my tax and insurance I escrow on my new house. Instead I pay that on my own but for the exact amount. No more, no less.
This is Generally a Problem with the US System of Buying a House. You are taking a Loan. The Bank Literally Owns the House. And so the Bank Pays all the Taxes and other stuff for the House which is then added to Your Loan. And if the Estimates are Off or some of these Cost went up in the Meantime. Your Loan will not be Reduced as much as Planned or it may even go up. Worse. You are then Paying Interest on it because You effectively Loaned the Money to Pay these Cost. In Germany if You Buy a House on a Loan. The Bank does not Own the House. The Bank instead gets an Entry that it can Take the House from You as Collateral if You Fail to Pay Your Debt. But the House still belongs to You. This Includes that if You See You cant Pay the House You can Sell the House Yourself to Pay Off the Loan before the Bank takes away Your House. (And before You ask. The Bank has a First Buyers Right here to Prevent Abuse. So if You attempt to just Sell the House Super Cheap to a Relative and then Declare yourself Bankrupt to Cheat the Bank for both House and Money. What will happen instead is that the Bank Buys the House Super Cheap likewise if You Sell the House for enough to Pay the Loan Off the Bank wont care and be happy they dont have to do the Work of Selling the House to Recoup the Loan) The Importand bit however is. All Taxes and other Cost are going straight to You and are NOT part of Your Downpayments. So whatever Rate You got is Fixed and Correct. As any External Cost are Bills You got to Pay Yourself just as if the House was your own. And is not Loaned to You by the Bank.
We got notified that our escrow needed to be adjusted on both properties (we have a rental). So they both went up some. Then at the end of the year we got a check with it all back for the rental property. What the heck was that all about?
the explanation is simple: taxes and insurance are estimated. your property taxes go up, your insurance premium goes up, your escrow account is underfunded (i.e. short). all the loan servicer can do is estimate the cost of taxes and insurance and have you pay what they estimate. this is not unique to 2024, it has always been this way.
This is very common where the escrow doesn't cover the total amount of insurance and taxes. BUT $5000 of shortage is a huge amount. They should have notified her well in advance of such a huge shortage.
@@jamihamilton5651 agree that is a huge shortage, but loan servicers do not monitor your taxes and insurance costs in between the payments or as an annual audit. That is your responsibility to make sure your escrow account is collecting enough to pay the insurance premium and property taxes.
@@xandercrew6088 Taxes can increase dramatically in some places. Adjusted valuations, bond initiatives, special assessments, surcharges and a myriad of other ways to take more of your money through property taxes. At a 3% tax rate adding 300K in valuation can raise your taxes from 15K to 24K.
@user-gh4vd5rj7l exactly. When I get the reassessment letter, I compare my old with the new in advance. It's our jobs to be prepared as homeowners. I learned this the hard way.
If you're not following the math, $2149 per month, with an escrow shortage of $5,212, means the banker underestimated the escrow by $434.33 per month. And if she can't make up the difference by April 1st, the bank is going to add that difference onto her future mortgage + $316.67; which is either the interest, or additional estimated escrow.
PAY the extra quarter-point at closing and manage your escrows yourself. In this way you will know your P&I will never change on a fixed-rate loan, and you can budget extra funds every year knowing property taxes and insurance will rise.
@@xandercrew6088 Yep, that’s the idea. I budget an extra 10 percent every year for anticipated increases in both real estate taxes and homeowners insurance.
@@fitgraphisva so 10% of the house value needs to be paid yearly ON TOP of the bank loan? Thanks for confirming just seems crazy to me, basically in 10 years you could buy another house with just …taxes?
@@xandercrew6088 Apologies…I was unclear. I budget an extra 10 percent for just the insurance premium and real estate taxes based on local trends. If I am paying $900 this year for homeowners insurance, I will budget an extra $90 per month for the following year’s anticipated 10% increase. Most years, it doesn’t increase as much as I have budgeted, so I have some left over.
@xandercrew6088 he's overestimating. Taxes vary based on tax, county and city. Sometimes the amounts don't actually change bc the value didn't change. My adjustment was around 1k last year and it's the same thing year per the reassessment I've received. As a homeowner, it's good to prepare for the unexpected though. 5k or 20k isn't normal though unless you did major renovations or the value of homes in your area increased drastically.
This is illegal in other countries. In Germany they have to tell you upfront what you are paying over the whole time each month or quarter that you pay.
Oh man I’ve got flashbacks. My escrow bank sent refund checks 3 years running, saying we had over the legal limit in escrow, then end of the year we owed double what the refund ended up being. Luckily we kept the money (the second time) and were prepared.
And people wonder why nobody is buying houses and nobody is having kids. My fucking HOA in Hawaii was almost $1200 a month... no mortgage or anything. Insanity.
My mortgage company is regulatly 2,100 over and won't issue me a check even though it's illegal to hold more than my note in escrow. So they insist I skip a month of payment.
Taxes get increased by $5000 in a single year? That would be like your property increasing in value from 400k to 800k in 12 months. I'm guessing they completely forgot about depositing into the escrow account, so now they're charging the lump sum at the end of the year to balance their books. Oh, and the monthly amount is going to get raised from $2150/month to $2600/month now that escrow is being paid into.
You're only considering taxes and not considering insurance. Also home values are changing by 100k-200k yearly in same areas. If your taxes increase, your insurance will too since it'll cost more to repair/rebuild the home.
Escrow is supposed to be included with the monthly payment. I get notices from the state that my property tax havent been payed every year. The escrow company the bank uses for this with pays the state taxes at the very last possible second according to the law. Its annoying af because like fools the first time this happened I paied the taxes. Never got my money back pretty sure the escrow company saw that the taxes where already paid and held onto the money. 😠 its upsetting for first time home buyers when they are not aware of the dirty tricks that are played.
This is why I avoid escrow at all costs. They will fight you on it. Stand strong. My first home had escrow, the first year, the shortage was about $2500 and I got a 3-4 week notice to pay or it would roll into the payment. The following year, there was an overage of $2400! Which I couldn’t cash out because they said so, and didn’t lower the payment… Can you say refinance with a different lender??? Fool me once 😢
This bs is exactly why you shouldn't deal with any kind of banks or loans until you get yourself a bit of stability but the world we live in right now does what it wants. Let you live freely with the collar of loans and morgage on your neck. And people berate those that live a couple more years with their parents to avoid this situation 😂
I started paying about $200 more per month when I purchased my home. It keeps this problem at bay and reduces your loan amount surprisingly faster. Veronica needed to look at her mortgage statement to see she was going in the hole. Her bad, this time...
I remember the total monthly for mine was $400. Inexplicable things did happen sometimes and I would magically be short and/or suddenly find myself paying $500/month instead without understanding why. What a world.
I think that $5000 they are now claiming is the interest you did not pay during the year because they chose to not tell you about the interest that you should have been paying during that year.
The trick is do not escrow taxes. Your town, county, and/or state will increase taxes yearly and send you a bill. If you escrow and the tax amount does not match your final Closing Disclosure, you are still responsible for the difference. The title company is responsible for providing the tax certificate, but your lender should confirm that it is in line with next year's projected tax. Edited to say no matter what, if it is required you need to escrow flood insurance. You can opt to not escrow home insurance and added policies such as wind/hail. TX is a flippin nightmare, not sure why anyone lives there.
Someone can't do math. If the amount owed is $2149 and the homeowner pays that, why is she short and where is it coming from? That's what needs to be explained. However, it sounds like the payments aren't being applied to the principal as well as the interest.
It's not Bout the loan, or principle or interest...escrow pays out homeowners insurance and property tax.... The...loan officer?....is doing a terrible job communicating that. Also, in my state, communication happens when those things change, so I am confused why that didn't happen here.
This is a very common occurrence when a loan officer squeezes a buyer into a home. The escrow containing “estimated” costs is surprisingly under quoted. Now the homeowner needs to pay the missing funds plus the new budgeted amount based on actual bills. This gets even worse if something like property insurance or tax assessments spikes the costs.
It's based on the insurance payment and the newly assessed tax Penryn got the home. This is generally common knowledge. Home values increase all the time so the insurance and taxes do as well.
@srki22 in a lot of cases in the US, yes you're responsible to pay it but it's included in your escrow payment. So it can affect your mortgage payment, not the home loan itself.
This has been happening for decades and decades- it’s not new. Escrow is the additional amount you agree to pay monthly toward the property taxes on your house- but it’s just an estimate, based on the previous year’s property taxes. If the property taxes go up this year (they usually do), you have to pay the difference. It’s not a “You told me this amount, but I have to pay more?!? as much as a misunderstanding of the situation. Does it still suck? Yes. I’ve had to pay the difference (between what was put aside, and the actual amount of the property taxes) since 1992. Not new.
No. The thing to get, is to understand the hidden costs. Toxic people do this crap on purpose. There should never be a hidden expectation amount. This is not ebay. That is like telling someone they can have a product for a cheaper price to get them in the door, then raise the price before they pay or in this case a year later. Because now that 5,000 gets added into the new montly rate + the difference of the expection amount minus the monthly rate.
This happens when you have a shitty originator/MLO, don't be mad at the servicer or the escrow account. Escrow is a good thing. You just got a loan that was originated badly. You can get longer escrow spreads for shortages of that size though. And you can shop around for home insurance just like any insurance, or contest prop tax increases, if that's what went up.
We have jumped the shark with this one. Impounded Costs first year were correct. Impounded Costs in Year 2 are projected to increase (insurance, tax, HOA, etc.). Annoying? Absolutely. Difficult to understand? Lol....no.
That's not how taxes or insurance work. It is in writing but that's not going to help in any way. If taxes and insurance increase, you can shop around and ask for a reassessment by disputing it, but the lender doesn't control that.
It’s never really fixed because everything other than the principal and interest go up. What I don’t understand is why the don’t do the analysis when things go up and wait til the end of the year to tell you, you owe! I know for a fact that my homeowners insurance went up and when I called the bank to see if my mortgage would increase she said, oh just pay a little extra towards escrow because your analysis isn’t due for several months!! 🥴
I hear everyone with the "well escrow is estimated yada yada", BUT does it not seem plausible that the nak purposely under estimates escrow so they can make the payment look more affordable? Sort of like they did with the ninja loans pre 2008? Taxes and insurance don't just explode by 5k over a year (unless the taxes were insanely high to begin with).
I know this is written to be hilarious but I have to deal with an accountant at work like this. It's like she doesn't understand the simple question you are asking or why you as the end user just needs the bottom line answer. Every answer she gives demands additional scrutiny. A simple question like what is my budget for the year and how much do I have left to spend doesn't get two numbers. That's a question requiring two numbers. Why aren't you giving me two numbers?
So i know this is a skit but for future reference how does one go about not having this happen to them or preventing this besides trying to save money on the side. Would paying more than mortgage help?
Nope. Just nope. If I sign a contract about a loan, everything is in writing. You cannot change the rates afterwards, that is the danger of being the investor in the end. End of story. Americans have the weirdest contracts if that is legal.
It’s that smile that’s irks my entire being. What’s funny about an average working class person getting a $5000 bill due upon receipt or $751 added to their mortgage? I understand how this happens; just hate this for us is all.
This is what happens when you don't read the paper you're signing. If there's too many papers, pay a lawyer to read them for you. If you're not willing to do that, don't sign the papers.
