Matthew Watts

What is it? An escrow account is basically a mandatory savings account to pay your taxes and insurance from. Every month you will pay your mortgage payment and a portion of that payment will go to the mortgage and a portion will go to the escrow account. When your tax and insurance bills come due, they will be paid from your escrow account company automatically. You will never see a tax or insurance bill, yet they will get paid.

Why do you need it? With almost all loans an escrow account is required by the lender you are getting your loan from. The same as with your mortgage payment, if you do not pay your taxes, you will face foreclosure. Instead of being foreclosed on by your lender, you will be foreclosed on by Uncle Same. The possibility of tax foreclosure threatens your lender's ability to ensure you repay them. Hence, they require that you have an escrow account so that you can't simply stop paying your taxes.

How will this affect your closing? You will need to fund the escrow account with enough money to make not only the next upcoming payment, but enough to make sure you never get behind on future payments. The amount collected will change slightly depending on the time of year you close, but in general you should plan on 3 months of your monthly Home Owner's insurance payments and 8 months of your monthly Property Tax payments to be collected at closing.

These reserves, while painful at closing, will end up making you very happy in the long run though. When your taxes go up- as they inevitably do- this will cushion the blow to your monthly payment and make the hike a more steady increase and easier to deal with.

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www.iconmortgagelending.com or call us at 810-953-4266

Pro-Rated Taxes: Oh, the agony! Nothing causes headaches the way pro-rated taxes do. What exactly are they? It's your tax bill...and yes...it is YOUR tax bill. In most places in Michigan you get two bills for Property Taxes. One for winter and one for summer. In the vast majority of places, you pay these taxes in advance meaning you are paying in July for the tax bill between July of that year and July of next year; same for the winter bill Dec.-Dec. If you buy a house, let's say in August, the seller has already paid for the taxes through July of next year. Even though they have paid through July, they will only own the home for one month covered under that bill and you will own it for the remainder of time covered by that bill. You will be required to reimburse them for the time that you will own the home- August through July for the summer bill and August through December for the winter bill.

How to calculate what you will have to pay. It's no secret; you can calculate this yourself to check it. Take your closing date. Count the number of days from that day until December 1^st. call this (a). Count the number of days from the closing day until July 1^st. call this (b).

Now take your winter tax bill and divide by 365, take your summer tax bill and divide by 365. Then you have the daily amount of each tax bill. Multiply the days you have by the daily amount and you can come up with the two amounts. Add them together and this is the amount of pro-rated taxes you will have to pay.

EXAMPLE: You close January 15th. So you have 320 days until Dec. 1 and 166 days until July 1^st.

The tax bills are winter: $565 divided by 365=$1.55 and summer: $1786 divided by 365=$4.89

320 days (a) x $1.55 = $496 and 166 days (b) x $4.89 = $811.74

$496+$811.74 = $1307.74 is your pro-rated tax bill.

Seems simple, why all the headaches? Well, with all of the foreclosure properties being bought now, there is rarely upfront truth about what the Property Taxes for your purchase are. Most times the MLS listing will reflect what the Property Taxes were before the bank took possession. When a bank owns a property they are unable to claim a Homestead Exemption like you and I. Think of the homestead exemption as a discount on taxes for you Primary Residence. The bank is not a resident, so they pay more. This also means that when you buy it from them, you pay more. Ask your Realtor upfront what the non-homestead tax amount is. This will help eliminate the possibility of a BIG surprise come closing time.

If you are still uneasy about whether the tax information provided is accurate or not, call the county tax assessor about the true tax amount you will be paying at closing time. Google: "county name" tax assessor to find the correct phone number.

For more information, visit our website:

www.iconmortgagelending.com or call us at 810-953-4266

It's so odd to me that so many people claim to have been mistreated by their mortgage lender. There is a litany of paperwork we are required to provide to you when you apply. I am sure there were plenty of less than reputable loan officers out there that didn't care to go through the numbers, but an even slightly educated borrower can't be taken advantage of. So, here's how to become an educated borrower.

The Good Faith Estimate. Make sure you get one, make sure you get one from several lenders, make sure you compare them row by row and not the bottom line. Some lenders may trick you by not providing certain numbers that will pop up later (read my other blogs), make sure you don't use anyone that leaves numbers off.

The Borrower's Bill of Rights. Make sure you get one, make sure you understand it. You can get it right here: Borrower's Bill of Rights, but don't trust anyone that doesn't give you one- you know since it's required by law and all. They are easily understandable, just actually read it.

You have the right to shop around, you have the right to know how much the lender is making. This doesn't just mean the fees, but how much they are making from the interest rate. Also, most people think only a broker makes money from the interest rate...and they are wrong. Banks make yield spread too, even when they fund the loan, so make sure to get IN WRITING how much they are making.

The HUD-1 Settlement Statement. This has all of the details of your loan, save the interest rate. All fees will be lined up for you and this is the FINAL document to calculate these costs. A major mistake most borrowers make is to wait until closing to see this. You have the right to see this before you sit down to close. Demand your loan officer provide it a day before closing.

Most importantly, don't accept the run around. There are a million and one excuses a lender can use to get around providing these documents in a timely manner. Unfortunately for them, you now know that they are required to do so.

Simply don't accept it. Look at more than the bottom line. Look at the integrity of the individual you are working with. If you can have faith in that person, you should do fine.

For More Information Go To Our Website:

www.iconmortgagelending.com

Call me a softy and a nerd. It's hard to believe, but yes I was one of the few that sat and watched Steve Preston's address to the National Press Club this past Wednesday. Many of you may not know who that is, but he is one of the most powerful people in the nation right now because he is the Secretary of the U.S Department of Housing and Urban Development (HUD) and he is trying to create hope for thousands of Americans that are currently facing foreclosure, or are soon to be facing foreclosure.

Unfortunately, as powerful as he may be, he is still all but hog tied by private industry and private industry is not budging. How bad is it? It was said that in the first two weeks of October 42 people applied for the Hope for Homeowners and all 42 were denied. First of all...42? Nationwide 42??? That's a joke. A joke that Steve Preston did not find funny.

Why has it failed? Simple, the private markets are already strapped for cash and not looking to spend more. FHA's flaw is that it cannot move without lenders to make the loan that they will insure. Lender participation has been non-existent and has crippled the legislation set forth to help "Main Street."

So, what's going to be done? There are two important things to remember. FHA will be raising the LTV cram-down from 90% to 96.5%. FHA will be providing up front payment to second liens holders for immediate release of these liens. Both of these actions should provide enough incentive for current lien holders to chose negotiation over foreclosure.

Debt ratios are normally strictly 31% for your housing payment and 43% for your total debt with FHA. The Hope for Homeowners program will open up to 38% and 50% for those that can get down to 90%, again adding more qualifying applicants to the pool.

They also will open the program to longer loan terms. If your debt ratios don't quite qualify at a 30 year term, you can also use a 40 year term to qualify. I suspect this is something that will come to the normal FHA loan soon. 40 and 50 year terms have successfully brought homeownership to thousands of Europeans over the past three decades and it's very long overdue in America.

Lender participation will still dictate the effectiveness of FHA's proposed help, but hearing these changes delivered from a very poised and positive Steve Preston finally brought me hope for the Hope for Homeowners program.

At least now we will see once and for all which is the proper method for dealing with this crisis- government intervention or capitalizing private market. Let me assure you, this is the final straw. If banks do not take to these changes and start making new loans....your tax dollars for the "bailout" will have been COMPLETELY WASTED. These banks have made billions, the CEOs have made millions at least one of them needs to step up now and join the club in trying to actually help people...I'm looking at you Chase.

For more in-depth help, visit our website:

www.iconmortgagelending.com

I talk to hundreds of first time buyers year after year and there are hundreds that don't qualify by just a bit. They are so close but can't get it done. I explain to them how close they are and offer direct advice on how just a month or two of fixing their issues will get them where they want.

I go through the trouble to give them the advice they need knowing full well that they will not follow up. Whether it is the lack of confidence to overcome or just plain laziness, so many of them give up and never come back.

So if you are just dipping your feet in the water and thinking about buying in the near future, let this help you prepare now to never have to feel the sting of denial.

Your Income: I know a lot of you work jobs where you get tips, or you are just now getting raises, or are new on the job. If you are in any type of training period you will not be able to get a mortgage, but don't worry as soon are that's done, you are qualified. If you have gotten tips and never claimed much of them, it is essential that you spend 6 months claiming even more than you are actually earning. Even though it will mean less money in your pocket during this time, it will do wonders to raise the 2-year average of you income and increase your ability to qualify.

Your Credit: If you don't have any, get some immediately. I know you may think that not having any debt may be good, but you are wrong. The bank needs something to judge you on and credit cards are essential. They show your ability to repay a mortgage while not adding a lot of monthly payments to your debt ratio. If you have a boyfriend/girlfriend, mom/dad, sister/brother that are willing to add you on their current credit card accounts do so immediately. Try to get one on your own too. This is the type of thing that if your score is slightly low just a month of obtaining credit can make the difference of qualifying or not.

Other factors: If you are on the edge of qualifying or not, the best thing you can do is to add any type of factors that can compensate for the areas you lack. If you pay rent in cash, get a checking account and start writing checks. Showing 6 rent payments made on time will do wonders at improving your qualifications, but cash just doesn't count. Money orders may work if you pay to an apartment complex but if you are renting a house, only checks will do it.

Start saving money. People always feel like it does not count, but even $500 will definitely increase your chances of qualifying.

Good Luck to you all.

For more in-depth information, go to our website:

www.iconmortgagelending.com