Homeowners insurance?
Wednesday, September 23rd, 2009 at
9:49 am
Doug B asked:
We are closing on a loan. The mortgage broker now says that we have to pay homeowners insurance for a whole year up-front. We have had nothing but problems with this company. Before this he said we would have to pay the taxes and insurance for the remainder of the month we closed in. I think he’s being untruthful and is trying to make another $800.00 on the mortgage. I got a quote from my insurance company for $450.00 for the annual fee. I am also closing today the last day of the month…..whats up?
I live in Ohio!
We are closing on a loan. The mortgage broker now says that we have to pay homeowners insurance for a whole year up-front. We have had nothing but problems with this company. Before this he said we would have to pay the taxes and insurance for the remainder of the month we closed in. I think he’s being untruthful and is trying to make another $800.00 on the mortgage. I got a quote from my insurance company for $450.00 for the annual fee. I am also closing today the last day of the month…..whats up?
I live in Ohio!
Tagged with: Insurance Company • Mortgage Broker • Taxes
Filed under: Homeowners Insurance
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Paying for the entire year is not at all unusual in a closing.
This is standard, if the insurance and property taxes are being escrowed – you DO have to pay for the full year up front.
If you want to avoid it, you have to put down at least 20%, and pay the property taxes and insurance yourself.
The broker makes NOTHING off of the homeowners insurance, so I have no idea how you think he’s making $800 off of that.
You just go to your insurance company, pay the $450, and ask them for a receipt showing you are paid in full for a full year.
I have never heard of a lender that didn’t require the entire insurance payment up front. The mortgage broker has no control of the Lender’s requirements. If you want to get a mortgage, you have to insure the property, and the Lender has to be added as an additional insured, atima (as there interest may appear).
Here is how it works: you pay the first year upfront, and then, the lender starts collecting your second year’s insurance payment each month with your mortgage and taxes, and it goes into an escrow account, two months after you settle. That’s if your lender is going to pay your insurance and taxes directly, which most do.
Your mortgage broker is also right that you have reimburse your seller for any taxes he/she prepaid for the time period you will own the home. Your tax clock starts ticking the moment the title passes. Settlement at the end of the month is smart, because you pay a little bit less in interest than you would if you settled in the middle of the month, for instance.
So far, everything your mortgage broker said is right. He doesn’t make any more money on the mortgage because you pay your insurance and taxes.There is no economic benefit to your mortgage broker for the settlement charges you incur. You should have received paperwork from the mortgage company that goes over all of the charges and fees they are charging. Insurance and taxes are not “fees” and they don’t benefit from your payment. You benefit, because you are paying for the property you are buying.
Your lawyer or realtor should have explained all of this to you, and should review every item on your HUD-1 when you settle today. You will see there is a place on the HUD-1 that reflects your insurance payment, and another place that reflects the taxes. Your HUD-1 reflects all of the financial transactions that occur for your settlement. Good luck in your new home. I hope this explanation helps.
paying the1st yr insurance and taxes at closing is standard practice.
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