Would you buy down rates with builder incentives?

[ShanetheMortgageMan]

Sheesh, guess it really does pencil out to be $30k, but I wonder if they are over collecting on the property taxes into the escrow account as it probably isn't assessed as a completed home yet.  Thank goodness the builder is giving you a $25k closing cost credit.  The Loan Estimate is just so they can list all of the different fees & costs on the loan though, it isn't used to show you the exact amount of money due at closing.  After the rate has been locked then at some point you'll receive an initial Closing Disclosure that will have more much accurate figures & the funds to close figure.

[NoMoreE46]

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@ShanetheMortgageMan wrote:

You have to make sure "Rich Text" is selected, then you can upload them by clicking on the "photos" that I've circled in red below.

Alternatively you can upload them to a 3rd party website, such as imgur, then post the link to it here.

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One needs to be to the rank of Member before images are enabled.
Hopefully, @ProudTox2014  will get there soon.  

[ProudTox2014]

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@NoMoreE46 wrote:

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@ShanetheMortgageMan wrote:

You have to make sure "Rich Text" is selected, then you can upload them by clicking on the "photos" that I've circled in red below.

Alternatively you can upload them to a 3rd party website, such as imgur, then post the link to it here.

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One needs to be to the rank of Member before images are enabled.
Hopefully, @ProudTox2014  will get there soon.  

I see. Thank you for letting me know. I used to be very active but had been MIA for a couple years. Too much was going on. 

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[ProudTox2014]

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@ShanetheMortgageMan wrote:

Sheesh, guess it really does pencil out to be $30k, but I wonder if they are over collecting on the property taxes into the escrow account as it probably isn't assessed as a completed home yet.  Thank goodness the builder is giving you a $25k closing cost credit.  The Loan Estimate is just so they can list all of the different fees & costs on the loan though, it isn't used to show you the exact amount of money due at closing.  After the rate has been locked then at some point you'll receive an initial Closing Disclosure that will have more much accurate figures & the funds to close figure.

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So I'm assuming the higher rate is better at this point? And hope for better rates in a year or 2?  

They might be overcollecting the taxes. Is it possible that after the county comes in and does the assessment, my taxes are lowered? What happens then? Does the payment change?

[Hipployta]

I did a new construction condo last year and did use the $25K to pay for closing costs and buy down the points. It was a VA loan though so no money down from me. Ended up being a $412K loan and a 5.5% rate.

[ShanetheMortgageMan]

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@ProudTox2014 wrote:

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@ShanetheMortgageMan wrote:

Sheesh, guess it really does pencil out to be $30k, but I wonder if they are over collecting on the property taxes into the escrow account as it probably isn't assessed as a completed home yet.  Thank goodness the builder is giving you a $25k closing cost credit.  The Loan Estimate is just so they can list all of the different fees & costs on the loan though, it isn't used to show you the exact amount of money due at closing.  After the rate has been locked then at some point you'll receive an initial Closing Disclosure that will have more much accurate figures & the funds to close figure.

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So I'm assuming the higher rate is better at this point? And hope for better rates in a year or 2?  

They might be overcollecting the taxes. Is it possible that after the county comes in and does the assessment, my taxes are lowered? What happens then? Does the payment change?

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It's such a long breakeven point if you buy down the rate;  in the next couple years I think there is a good chance rates will get down that low without having to pay as many (or any) points.  The spread between where rates have historically been in relation to the bond market & where they currently are at is .75% higher than historical norms, so once investors are comfortable with the economy (meaning it's being very predictable) then I feel rates will pull lower.

If your property taxes turn out to be different than what the mortgage lender is estimating them to be then your escrow payment will be adjusted to the correct amount, with either the excess being refunded to you or if you are short then you'll have the option to pay the shortage in a lump sum or your escrow payment will temporarily increase to cover it.

[GreatLife]

Just throwing this option out there..have you considered directly paying taxes & insurance with no need for escrow? In PA most municipalities & counties offer early pay discounts that could be to your advantage..plus the mortgage stays nice n neat with no payment fluctuations.

[ProudTox2014]

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@GreatLife wrote:

Just throwing this option out there..have you considered directly paying taxes & insurance with no need for escrow? In PA most municipalities & counties offer early pay discounts that could be to your advantage..plus the mortgage stays nice n neat with no payment fluctuations.

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Oh I did not know that. I was going to apply for homestead to decrease a little bit the taxes. I will consider closing the escrow after a year since I have > 20% down and will pay the taxes in advance.

[GreatLife]

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@ProudTox2014 wrote:

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@GreatLife wrote:

Just throwing this option out there..have you considered directly paying taxes & insurance with no need for escrow? In PA most municipalities & counties offer early pay discounts that could be to your advantage..plus the mortgage stays nice n neat with no payment fluctuations.

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Oh I did not know that. I was going to apply for homestead to decrease a little bit the taxes. I will consider closing the escrow after a year since I have > 20% down and will pay the taxes in advance.

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Whatever you decide the homestead will still be applicable and it's a once & done if not already using for another property. I'm somebody that still grumbles about the casino revenue money that was SUPPOSED to be used for property tax reductions 😄.

Congrats on your new home!