Unimproved Property vs. Improve Property tax...

[birjest]

Ok, I need guidance on this.  My LO explained to me that he locked me in at 3.625% FHA with the builder paying $7500 toward closing and $2500 in prepaid.  The LO  states that he will pay $1800 toward my closing.  My estimated closing cost is $8200, with estimated pre-paid of $2800. 

The LO stated that he want me to go into closing with the property as unimproved property because the county won't recognize it as such for another 2-3 months.  Thus, I will have a lower prepaid and my mortgage payment will be less the monthly property tax.  Then in November, informed the mortgage company that it is an improve property.  Basically, he didn't want me to have too much funds in escrow and having to wait to January, thus, have me to go in as less for closing.

This is a great guy.  Been busting his hump for me.  I just need some clarification on this unimproved vice improved.  My closing is on the 22nd of this month and so far, there's no hiccup from the loan processor.  Just need to get to them another binder check this week.

[tooleman694]

Be prepared for when the tax bill comes and your escrow is short.

You either have to come up with all of it, or you will be paying double property tax for all of next year.

[StartingOver10]

I don't agree with the strategy unless you have a ratio issue. Did he say that if you went in with improved property taxes it would affect your approval or is he just trying to get your payment down for a few months?

The reasons I don't agree with using the unimproved value is the following: 1) the property improvements are in place the date you close 2) the seller pays the taxes from jan 1 to the closing date because they owned the property during that time (if you go in as unimproved the seller pays on unimproved) and 3) you have a lump sum due out of your pocket the minute the actual tax bill comes out. This could create an issue for you when the lender  does the escrow analysis at the end of the year.

Better to close with the improved value IME but naturally the choice is yours.

[birjest]

I agree.  I am going to go with the improve route.  THANKS!!!

[readytoown]

Hello,

I have been searching the web for help on this subject, but I have been unable to find anything. I am hoping you are still around. We are in the process of purchasing our first home. Our file made it through underwriting, all the way to the closing processor. Once there everything haulted because the property tax on the loan is the unimproved tax, not the improved property tax. When the improved tax is placed on the loan it increases the dti out of qualifying range. I do understand using the unimproved tax on the loan now, will create an increase in mortgage later when the improved taxes are applied. This is not a problem to us because I am on the loan alone, and my husbands income is not considered. So if I can afford the payment with my income alone, a couple hundred increase wont cause strain on us. My husbands income is greater than mine. How can we get this home closed with the unimproved taxes? We are due to close next week, and dont want to lose this home. I hope you can give insight.

[DallasLoanGuy]

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@readytoown wrote:

Hello,

I have been searching the web for help on this subject, but I have been unable to find anything. I am hoping you are still around. We are in the process of purchasing our first home. Our file made it through underwriting, all the way to the closing processor. Once there everything haulted because the property tax on the loan is the unimproved tax, not the improved property tax. When the improved tax is placed on the loan it increases the dti out of qualifying range. I do understand using the unimproved tax on the loan now, will create an increase in mortgage later when the improved taxes are applied. This is not a problem to us because I am on the loan alone, and my husbands income is not considered. So if I can afford the payment with my income alone, a couple hundred increase wont cause strain on us. My husbands income is greater than mine. How can we get this home closed with the unimproved taxes? We are due to close next week, and dont want to lose this home. I hope you can give insight.

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what % does the improved taxes make the dti?

[watchhimfixit2013]

It will take the dti over 51%?

[DallasLoanGuy]

how did the loan officer not know that improved taxes would put your ratios over?

call his/her boss and get any upfront fees (appraisal?) re-imbursed.

totally incompetent

you can close on unimproved taxes..... but you have tio QUALIFY with improved.

[StartingOver10]

Dallas hit the nail on the head^^^.

The very first thing is running your ratios and the LO appeared not to do that right at all. Even if you could close with the unimproved tax amount - why would you? You still have to pay for the taxes on an improved basis. 

[watchhimfixit2013]

Ok great. So at this point I can literally call their bluff when they tell me the loan can still close, they are just waiting for a " letter from the city" with the taxes on it? Because even with using unimproved taxes, I still would have to qualify with the improved taxes. Yes, an apprasial was paid for, and yes I want that money returned. I am hoping we can get our deposit back from the builder. Thank you so much.