@ChrisinKC wrote:Well, that stinks.
So really I need to have 18 months of Home Owner's insurance (12 + 3 + 3 reserve), 6 months of Propety Taxes (3 + 3 reserve), plus at least 3 months of P&I reserve in my bank account at the time of closing, in addition to my closing costs and my deposit.
That's not gonna happen, as every single penny I have is currently being saved for covering just the deposit and closing costs. Guess I'll need to forfeit my non-refundable deposit to the builder and walk away.
Has anyone here done that?
@frugalQ wrote:
Prepaids and reserves on a closing cost spreadsheet is different than the liquid reserves we are talking about.
For closing purposes, you must prepay your 1st year homeowners insurance upfront. Then, in your case, you are required to have 3 months of taxes and homeowners insurance in your escrow account so when it's time to pay taxes and pay for your homeowners ins renewal, you will have the funds in your escrow account. the mortgage company is required to pay the taxes and insurance on your behalf...it's not something that you are responsible for paying. We normally don't differentiate between the two and just call them all prepaids.
The reserve which we have previously been referring to is the amount of funds you need to have available in case you run into financial trouble...you have 3-6 months worth of funds available to pay your mortgage. It's theoretical in the sense that you can spend those "reserved funds" immediately after you close.
...you are misreading what has been said
1) you need the down payment, which is paid at closing, but you must demonstrate that you have well before closing
2) you need prepaids which are generally contract deposit, lender fee(s), inspection, appraisal, and one year homeowner insurance ...this can vary from lender to lender but are normally paid at timepoints between contract acceptance and closing
3) you need all "other" closing costs which includes as yet unpaid loan fees, costs and escrows ...in your case escrows will apparently include 3 mts homeowners insurance and 3 mts property taxes ...the closing costs (including escrows) vary from state to state
4) you need 3-6 mts of PITI in liquid assets in addition to 1/2/3 above ...you do not pay these to anyone ...you just have to demonstrate at closing that they are available
...all of these costs are detailed on documents your lender must provide to you, generally twice during the mortgage process, once as a GFE (good faith estimate) and once as a HUD-1 form after underwriting is complete and before closing (assuming you are using a govt guaranteed loan) ...the document names sometimes vary but are always there in every mortgage transaction ...you need to go over this document in detail with your Loan Officer to ensure you understand both the amount and when it will be necessary for you to either demonstrate availability or actually pay
...I see nothing in the info you have provided that will prevent you from meeting these requirements ...hth
