80/20 question

[chesire17201]

in trying to avoid having pmi we are thinking of going with an 80/20 loan, my question is, are the property taxes still in the payment as with, say a 100% loan or am i just paying P&I with an 80/20 and take care of the taxes when they are due through the year?

[amortgageman]

I highly recommend escrowing taxes and insurance with your mortgage payments at least 80% of the time. The only exceptions to this rule, is with applicants who have some over abundance of wealth or have demonstrated the ability to pay debts responsibly. Ultimately, the decision is yours, and some lenders charge an extra 1/4% to not escrow.

Do consider this though, do you want a homeowners policy payment come due for about $600.00 once a year, and tax bills come due two to three times per year asking for another $600.00 each time. That, to me, would create havoc on a tight budget. (I dont even like the car insurance premiums coming due every four months, {Seems they always send them for two cars at Christmas time}).

From time to time there are mortgage servicing issues that come into play with several companies, and many times the servicing issues begin with "force placed homeowners insurance" (which costs about three times as much as "street market" insurance). If you have escrow accounts set up to be handled with your mortgage payment, and they come asking questions about your insurance coverage or property taxes, then you will be able to lay the burden back on them and ask, "Why did you not pay for it, I have these payments added into my mortgage payment, please follow up and pay these according to my mortagage agreement."

FHA/VA mortgages, you must set escrow accounts up. Some of the others such as Fannie Mae, Freddie Mac, etc. charge a premiumm to the rates, should you elect not to escrow..........Somehow, the more risky subprime lenders do not have the abilities to escrow, and you must set an account up with an "escrow company," which charges a set up fee, and about $5.00 /mo. (Stay tuned to Congress this year, as the National predatory lending bill has mandatory escrows included in this bill. In my opinion, this time it is good legislation, with bipartisan support from both parties. I just wish they would make banks adhere to disclosing yield spread, just as mortgage brokers are required.)

Dang funny thing is, the companies that do not acept escrow acounts, are the ones where the consumers have mortgage servicing issues. But, to explain what investors buy these loans (Real Estate Investment Trusts or REITS), and big companies such as Smith Barney, Lehman Brothers, etc, are only looking at return on investment, that little extra 8% return vs. a 5.5% return on government bonds, and you get the picture. Lehman Brothers does not want to mess around with escrow accounts. Make sense.

[chesire17201]

thanks amortgageman, you pretty much said what i was thinking, that if nothing else i would rather just have this payment added to the P&I and be done with it, like you said......Do consider this though, do you want a homeowners policy payment come due for about $600.00 once a year, and tax bills come due two to three times per year asking for another $600.00 each time. That, to me, would create havoc on a tight budget. (I dont even like the car insurance premiums coming due every four months, {Seems they always send them for two cars at Christmas time}). .....i personally feel it just would make my life easier not to deal with it and just have it included in my monthly mortgage payment...