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Explaining Escrow Accounts & mortgage

1/24/2018

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Upcoming Free (& non-promotional) Home Buyer Classes:

Saturday February 3rd , from 9am-12pm (ish)
        Marshall Community Center, conference room
       1009 E. McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)
Monday, February 12th, from 5pm-8pm (ish)
       Marshall Community Center, conference room
       1009 E. McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)


If these class dates and/or times don't work for you, please let us know.  We understand that you have lives, and families, and work.  We will work something out that works better with your schedule.  Just let us know....                                                                                  
....we also have home seller classes available too...link on left on website
                  
Remember...with reservation...we will throw in lunch, or dinner!  :-D
~~~~~~~~~
Happy Hump Day!


Before I talk about Escrow Accounts, I want to tell you about something that I think will be fun.  :-)  At the winter client appreciation event this year, Chris and I would like to offer calendars...but not just any boring calendar, but a 'fun' one.  I want to put together a calendar full of YOUR pictures.  So.... every month I am going to ask you to email me your photos to Traciedemars@aol.com, and I am going to post those pictures on my facebook business page at 'Tracie DeMars Real Estate'.  The pictures with the most 'likes' are the ones that we will put in the calendar, AND those people will get a gift card to either a movie, or coffee, or dinner, etc.  :-)  So, send me those photos!  Let's have fun with it  (and please, family/public appropriate)  

Now...to work.. this week I want to talk about bit about escrow.  We hear about escrow in a couple of different instances in the real estate process.  

When a home is IN ESCROW, it means that it is pending sale.  The buyers made an offer, and the contract was accepted (or negotiated to acceptance) by the seller.  Once this happens, an earnest money check is written to the title company by the buyer. This check is deposited.  The buyers agent sends a copy of the purchase/sale contract to the title company so that, with the earnest money, the home is opened up into escrow.  The buyers agent also sends a signed around copy of the purchase/sale contract to the buyers lender so that the buyer can meet with the lender to sign the loan disclosures and get the loan started.  Remember that the pre-approval (while important when making an offer) doesn't mean anything until there is a signed around purchase/sale agreement.  A pre-approval is just a piece of paper....a snap shot of your current financial situation.  You need to meet with a lender to get pre-approved for a loan so that you know 1- how much home you are approved for, 2- what type of loans & programs you qualify for, and 3- which loans & programs might work best for you.   It's YOUR job to know how much home you can afford though.  Your lenders job is to pre-approve you for as much as possible, but it's your job to know how much home & payment you can afford.  Right now interest rates are pretty volatile, and they are constantly fluctuating.  When the rates go up, how much you get pre-approved for goes down.  The interesting thing is that a lender doesn't really pre-approve you for a price range...the lender pre approves your for a monthly payment based on your credit, income and debts (this is called a debt to income ratio).  Your interest rate isn't locked until you are about 30 days from closing.  What this means to you is that you may not get the interest rate you are quoted at pre-approval since your lender can not start the actual loan process until you have a signed around purchase/sale agreement on a home.  Once the lender receives your signed around purchase/sale agreement from your agent your lender will begin to ask for more paperwork and documents.  Please get those papers to your lender as soon as you can.  We will go over what happens after your offer is accepted more next week.  
 
When the home is IN ESCROW the escrow company/title company then sends out a title report to the buyer. Look this over as some folks need to provide additional information to the title company.  Call the title company with questions as they work for you too. 

One of the things that is set up when you close on your new home is the escrow account.  What is an escrow account?

   So what is the escrow account?

   If you remember a couple of weeks ago I talked about the 4- 5 parts of a mortgage payment...Principal, Interest, Taxes, and Homeowners Insurance (and for most people; the Mortgage Insurance).  I mentioned how the title company will set up an "escrow" account for the buyer...but what is an escrow account?  An escrow account is an account set up to receive a portion of your mortgage payment for the payment of those items that don't go directly to your loan/lending institution.  So what do I mean?

Escrow...
   That portion of your mortgage that goes toward property taxes, homeowners (aka Hazard) insurance, and mortgage insurance (if you have it and most people do) will be placed into your escrow account.  This account builds up, and when your property taxes are due, those taxes will be paid from your escrow account.  Your homeowners insurance is due once a year (and if you have flood insurance this will also be part of your escrow account), and when it comes due, that payment will be made from your escrow account.  (If you have a HOA, this fee may also be placed into your escrow account.  You might be responsible for a HOA payment outside of your mortgage payment....ask your lender about HOA payments.) You may still receive a bill for your taxes, and insurance, but again...those bills will be paid as part of your escrow account that has built up over the year to pay for these items. 
    On the anniversary of your loan, you will get an escrow update.  While your interest never changes, and neither will your loan (unless you re-finance) your mortgage payment can change depending upon whether or not your property taxes go up, or down, and whether or not your insurance amount needs to increase as your home increases in value.  Your homeowners insurance needs to be for the amount of your homes value, so as your homes value goes up, so can your home owners insurance.  As these are part of your mortgage payment, if it goes up...so does your payment...if it goes down....so can your payment.  It usually isn't by too much though...either way.  Every year when you get your escrow account update it will let you know whether you will have enough in your payments to cover next years payments, or not.  Another example.... my escrow update came in recently and says I will be a little short for this next year.  I can either mail them in $140, and my payment will go down $3 a month, or I can do nothing and my payment will go up $5 a month.  I chose to do nothing as I always pay extra on my principal to shorten my loans length of time anyhow. Property taxes are based on the county's assessment of your homes value.  The county assesses the homes yearly, but the numbers they use for tax assessment are anywhere between 12-18 months old, so just know...your tax assessed value is NOT your market value!

   I know someone is going to ask if you have to have an escrow account, or if you can pay taxes & insurance separately?  Well, I have had clients in the past you have done that...but I wouldn't count on it nowadays.  The vast majority of people will use a FHA loan, and for any state/government loan, they will mandate the buyer have an escrow account set up to pay taxes & insurance.  However, please talk with your lender about this if you would like more information.  

**as a quick reminder...all home buying adventures should START with the Home Buyer Education Classes.    Don't talk with lenders, and agents until after the classes so you know the questions to ask, what the paperwork means, and fully understand the process.  As always though...the classes are Free and Non-Promotional.  We are not there to promote ourselves or any 'special' agenda like some classes, and while we certainly hope you will call Chris or I, or both of us, to help with your home buying adventure, that certainly isn't the main focus of the classes.  :-)  We are, both of us, as always, here to help!

 
            Information is power, and I hope that I am able to help you.  Good luck, and as always...May the odds be ever in your favor out there....  AND If you are looking for a real estate agent, I would love to be able to help you.                                                                       
 
    As always....this is just a quick overview.... again...and I can't say this enough...please remember that your agent is NOT a salesperson, and should not be acting like one.  Real Estate is not really about houses, it is about relationships.  Your agent, and your lender work for YOU.  You drive the bus...we are merely GPS to help you get to your goals.  Like the classes, this weekly blog email is to help you with your home adventure.  The goal is to be informative and non-promotional.  :-)  We are, however, hoping you will call and want us to help with your adventure.  

If you have any questions about this, or something you have heard...or if you would like me to help you with your home adventure, please call, email,  text, or facebook me anytime.  I am, as always, happy to help!
 
Thank you again for your business and your referrals!!  ...and thank you for referring these classes to your friends, family, and co-workers. 
 
 .   ..disclaimer...if you have already purchased a home, or would no longer like to receive these emails, please let me know and I will be happy to remove you from any further mailings... 
 
 
Upcoming Topics: What happens after an offer is made? or  
                              When is the pre-approval, not a pre-approval?

Last Week:  What's in the Mortgage Payment?

Have a great day, and I will talk to you soon,   
;-D   
Tracie DeMars   
Real Estate broker    
Re/Max - Van Mall   
360/ 903-3504 cell   
360/ 882-3600 fax   
www.traciedemars.com   
traciedemars@aol.com   
    
“Interested in free and non promotional home education classes?  Go to www.freehomebuyerclasses.com for local upcoming home buyer and home SELLER classes, or facebook: Tracie DeMars Real Estate for my home buyer education blog.”
"Listen to the mustn'ts, child. Listen to the don'ts. Listen to the shouldn'ts, the impossibles, the won'ts. Listen to the never haves, then listen close to me... Anything can happen, child. Anything can be."    
   - Shel Silverstein, American poet, cartoonist and composer, (1930 - 1999).

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January 07th, 2018

1/7/2018

0 Comments

 
Picture
Upcoming Free (& non-promotional) Home Buyer Classes:
Thursday night, January 11 , from 5pm-8pm (ish)
         
Marshall Community Center, conference room
         
1009 E. McLoughlin Blvd, Vancouver WA (kitty corner from Clark College)

Saturday, January 20, from 12pm-3pm (ish)
       
Vancouver YMCA, conference room
       
11324 NE 51st Circle, Vancouver WA (corner of SR500 & Gher Road/112th Ave)

If these class dates and/or times don't work for you, please let us know.  We understand that you have lives, and families, and work.  We will work something out that works better with your schedule.  Just let us know....                                                                                  
....we also have home seller classes available too...link on left on website
                  
Remember...with reservation...we will throw in lunch, or dinner!  :-D
~~~~~~~~~
Happy New Year!!

So, how has the first week of the year been treating you?  I hope good....and that you are not down with the crud that has been making the rounds.  I had that in early December, so I am just hoping it doesn't come back around as it is awful!  Here's to wellness in the new year... wellness, happiness, joy, and lots of good things!  The new year does make us want to look forward though,  and for many people ....start thinking about buying (or selling) a home, or both.  Buying a home will be the largest purchase you ever make.  The only thing that will cost your more than buying a home is having a child.  :-)  Like a child, you have to take care of your home though, and there is more to home ownership than most people realize.  
   Every month you pay bills, and your mortgage payment will most likely be your largest monthly expenditure, but what is it?  We will talk about how a mortgage payment works soon, but this week, let's talk about the five parts of a mortgage payment.  

Now...what is all in your payment?
 
   There are four parts to your mortgage payment...it is called a PITI payment.  What that means is Principal, Interest, Taxes, and Insurance.  For example, if my payment was $2000, my principal/interest portion would be about  $1300 a month, and the other $700 a month would be put into an escrow account.  Out of this account comes the homeowners insurance payment once a year, and property taxes are also paid from this account twice a year.  All of these fees are wrapped into the monthly mortgage payment.  Anytime you are using a FHA, or any government type of loan like RD (USDA), or the downpayment assistance programs & grants (like Home Advantage or the NHF), these fees must be wrapped into the mortgage payment.   If you don't have a 20% down payment (like 99.9% people), then your mortgage payment will actually have FIVE PARTS with the fifth part being Mortgage Insurance. Another insurance that 'could' come out of the escrow payment is flood insurance.  If you live in a flood plain (I used to), then you will be required to carry flood insurance.  Flood insurance would be wrapped up into your mortgage payment, and be deposited into your escrow payment for a payment once a year.  

Mortgage Insurance vs Homeowners Insurance
 Mortgage insurance is different than home owners (sometimes called, Hazard) insurance.  In a nutshell, mortgage Insurance protects the lender in case you default on your loan, and homeowners insurance protects you & the lender in case something happens to the home....ie.. a fire, a tree falling on your home, a car driving into your home, burst pipes, etc.  

Homeowners Insurance
   Now, please remember, you do choose your insurance company!  One of the things I suggest to clients is to contact their insurance company after they make their offer and to do a couple of things...(1) Has there been any water of fire claims in the past 3-5 years on this home?, and (2) How much would the insurance be for this home?  Average homeowners insurance is about $500-$700 a year....again, it is wrapped up into your monthly mortgage payment so it is NOT another extra expense.  You do get to choose your company, and many companies will give you discounts for 'bundling' your policies...like, home, car, life, etc.  It doesn't hurt to call around for quotes.  Once you choose a company, you will want to request that your insurance agent send over an 'insurance binder' over to your lender. 

Property Taxes
  Taxes are decided by the county, and are usually paid twice a year. You may get a copy of the tax bill, but again, it is paid by your mortgage company out of your escrow account.  I always get phone calls when these bills come out.  :-D  No worries...it is just for your records, and I encourage your phone calls!!  :-)  Please remember that 'Tax Assessed Value' is NOT market value.

Principal & Interest
   Now...your principal and interest portion of your mortgage payment.  As we know a portion of your mortgage payment every month goes toward the principal amount that your borrowed to purchase your home, and a portion goes toward the interest that the lender is charging you.  In the beginning of your loan the smaller amount goes toward principal, and the larger portion goes toward interest...this eventually switches.  We all know the wisdom of making an additional payment every year on your mortgage to reduce your loan time.  Some banks will offer to take your payment in two week portions, and make your additional payment for you.  Honestly I don't advise this.....before you think I am crazy, this is the reason why....the bank actually holds your money and makes your additional payment at the end of the year.  This isn't the best way for you, really....  I always pay between $25-$100 extra on my mortgage every month depending upon our finances that month, but apply it directly towards my principal borrowed amount.  At the end of the year I have made that extra payment directly towards my principal, which is less money I can be charged interest on!  This will shorten my loan length considerably.  In the end I actually pay MORE on the principal amount than I would have if I had just made one extra payment.  My suggestion to all my clients is to take that $20 from each paycheck and put it into that credit union far away (with no debit card or checkbook for) that is for your home repairs that are needed as a homeowner.  If you just put at least $25 per month extra toward your principal loan amount you will also be shortening your loan time.  This sounds like a lot...but really is it?  It is a trip to McD's (for my family anyhow as we have 2 adults, a second grader, and either my adult son, and/or my adult daughter and her husband.), or a couple of Dutch Brothers trips a month...but it will help you in the long run immensely. 
   So there are the 5 parts of your mortgage payment...Principal, Interest, Taxes, and Insurance...both Mortgage & Homeowners.....all tidily wrapped up into one payment every month..

  Yay!  I kept it shorter this week!  :-D  It's like going to the grocery store, and only coming out with the items you went in for....ok, who am I kidding...that never happens!  
  
          Information is power, and I hope that I am able to help you.  Good luck, and as always...May the odds be ever in your favor out there....  AND If you are looking for a real estate agent, I would love to be able to help you.                                                                       
 
    As always....this is just a quick overview.... again...and I can't say this enough...please remember that your agent is NOT a salesperson, and should not be acting like one.  Real Estate is not really about houses, it is about relationships.  Your agent, and your lender work for YOU.  You drive the bus...we are merely GPS to help you get to your goals.  Like the classes, this weekly blog email is to help you with your home adventure.  The goal is to be informative and non-promotional.  :-)  We are, however, hoping you will call and want us to help with your adventure.  

If you have any questions about this, or something you have heard...or if you would like me to help you with your home adventure, please call, email,  text, or facebook me anytime.  I am, as always, happy to help!
 
Thank you again for your business and your referrals!!  ...and thank you for referring these classes to your friends, family, and co-workers. 
 
 .   ..disclaimer...if you have already purchased a home, or would no longer like to receive these emails, please let me know and I will be happy to remove you from any further mailings... 
 
 
Upcoming Topics: Escrow Accounts, and what they do  or
                                  When is a pre-approval not a pre-approval?
Last Week:  Want to buy a home?  Where to start?


Have a great day, and I will talk to you soon,   
;-D   
Tracie DeMars   
Real Estate broker    
Re/Max - Van Mall   
360/ 903-3504 cell   
360/ 882-3600 fax   
www.traciedemars.com   
traciedemars@aol.com   
    
“Interested in free and non promotional home education classes?  Go to www.freehomebuyerclasses.com for local upcoming home buyer and home SELLER classes, or facebook: Tracie DeMars Real Estate for my home buyer education blog.”
"Listen to the mustn'ts, child. Listen to the don'ts. Listen to the shouldn'ts, the impossibles, the won'ts. Listen to the never haves, then listen close to me... Anything can happen, child. Anything can be."    
   - Shel Silverstein, American poet, cartoonist and composer, (1930 - 1999).

0 Comments

    Tracie DeMars
    real estate broker with Re/Max

    I have been in real estate for about 16 years now, and I have seen the market up, down, and now going up again.  I teach the Clark County Free Community Classes for Home Buyers & Home Sellers to help buyers learn about the loan, and home buying process; and sellers to learn about the paperwork and process of selling a home.  We are volunteers, and have no affiliations so we are able to tell it like it is...with no sugarcoating.  The pros, the cons, we tell it all in a fun, engaging, direct manner that encourages class attendee interaction and involvement.  Classes are free and non-promotional and held at community locations.  Walk -ins are welcome and all are invited.  
    ​Whether you're buying or selling a home, Education should always be your first step! 
    **we now offer Home SELLER classes too, by reservation.  It is a sellers market out there, and the classes are designed to go over all the paperwork, the 'right' questions to ask, how to make sure your agent is really working for you, what a CMA (comparable market analysis) is, and what is considered a comparable home....and going over the settlement statement.  What are the fees?  What are you going to net???

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