Are you buying a newly constructed home in Florida? Have you heard horror stories about escrow accounts being shorted for property taxes? This is a big problem with most lenders that they have not fixed the tax loophole for escrow accounts. They also have a hard time fully disclosing what a true estimate of property taxes will be on your new home. It only takes a few moments to ensure this doesn’t happen to you.
I have personally felt the impact of a mortgage company improperly estimating the property taxes shorting the escrow account. The actual taxes were much higher and increased my monthly payment by $500 per month for the next year to correct the actual county property taxes. I have seen client’s escrow accounts shorted by thousands. There are a few things that you “the consumer” can do to safe guard this unexpected surprise and avoid a financially upsetting situation.
How does this happen? This shortage generally happens if the newly constructed home was built in the same year that you are closing on your home purchase. The taxes on your HUD1 or settlement statement may only reflect the taxes due on vacant land. The following year you’re taxed on the fully calculated land and improvements. There may also be adjustments based on your occupancy type. Homesteaded owner occupied properties may reduce your county property taxes.
This discount for the first year could be great as long as you are aware that the actual taxes may be significantly higher than the taxes on the land in the first year of ownership.
Here are the steps to prepare for the proper estimated county property taxes on your new home:
- File for Florida’s homestead exemption as soon a possible. Owner occupied home owners may help reduce your tax liability, and prevent substantial tax increases on your new home. Visit your Florida’s county tax collector’s website for more details. This may save you thousands of dollars in property taxes as your home’s value increases over time.
- Calculate the estimated taxes based on purchase price available on the website. Review the current property tax bill in order to see the estimated increased amount. This will allow you to plan for the proper county property taxes.
- Review your HUD1 or settlement statement before closing to make sure the lender and Title Company has properly estimated the fully taxed amounts for your escrow reserves. Keep in mind they will not be able to show the actual taxes paid to reflect the increase. They may only increase the reserves needed for you to properly fund your escrow account. Make sure you ask your lender or loan officer to increase the required to escrow reserves to keep your escrow account in the black and avoid a substantial monthly payment increase.
- Review the following lines on your settlement statement: Buyer’s side, 210. City taxes, 211. County Taxes, 216. Proration of Taxes, 1000. Reserves with Lender, 1003. City Taxes and 1004. County Property Taxes.
I have dealt with hundreds of people purchasing newly constructed homes. They are so excited about buying the home that there are many things they do not consider before buying. All prospective home buyers really want to comfortably afford their new home. Keep a comfortable cushion of cash savings for any unexpected expenses or increased payments due to either tax or insurance increases.
A little time spent to review and know all the estimates before closing will ensure that you are fully prepared for home ownership, and any unforeseen expenses. Consult with your Real Estate Agent, Mortgage loan officer, Broker, Lender, or Title Company, to ensure that your taxes are properly escrowed for your home purchase.
Call Brian Schoedel for free advice on correcting your escrow shortage on your current home loan. You have several options available to get your monthly payment into a manageable monthly payment and correct your escrow shortage.
Or call me anytime. No Obligation consultation!
Home America Mortgage, Inc.
Brian M. Schoedel