YOU HAVE QUESTIONS, WE HAVE ANSWERS!
VIVA ESCROW Q & A SEGMENT
(Real questions sent to us – verbatim!)
QUESTION:
I am supposed to put 5% for down payment, but the escrow wants me to bring in so much more that it looks like I have to come up with over 10% to pay the down payment and closing costs! Can you explain this?
ANSWER:
If you are in a purchase transaction that only needs 5% down payment, you are probably getting an FHA 95% loan for the balance. Your loan broker should have explained the breakdown of costs in advance, so that you are not in shock when you get the estimated closing statement 5 days before you close escrow.
Among other things, there are 3 up-front costs that an FHA loan program will require. You should confirm with your loan broker regarding them:
- One year’s mortgage insurance premium (MIP) – which can be added to the loan amount from the start so that you are not out of pocket.
- Set up an impound account for the payment of your future property taxes. Depending on the tax period of your closing, This impound account could require 3-5 months’ worth of your future property tax payment.
- Set up an impound account for the payment of your future insurance premium. Normally, this amount could equal 1-2 months’ worth of your future insurance premium payment.
However, irrespective of percentage of down payment and what loan type you are getting, the following costs have to be paid:
- Per day prepaid interest from closing to the 1st of the next month.
- Property taxes that are due at the time of the closing. Or if paid, payback the Seller for the amount from closing to the end of the tax fiscal year.
- Pay your insurance premium for the upcoming year.
- All your regular closing costs, including your lender/loan broker loan origination fees, escrow fees, title fees, etc.
So yes, although you have 5% down payment, the rest of the closing costs will increase the total funds to be deposited for closing substantially.
EDUCATIONAL MOMENT:
Sometimes putting more down payment might mean less in loan closing costs. The costs incurred for a 90% or even 85% loan might be less than costs for a 95% loan. It is always important that Buyers know this when they are first contemplating a purchase and figuring their total funds availability. Then they can shop for the type of loan program that is best for them.
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~ Video of the Month ~
In the scary world of AI,
a Google AI video to remind people about scams
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~ Quote of the Month ~
Given that 2026 will be a mid term election year,
“I offer my opponents a bargain:
if they will stop telling lies about us, I will stop telling the truth about them.“
~ Adlai Stevenson, campaign speech, 1952 ~
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My YouTube Offering for the Month
What can affect an escrow closing date? Here is an explanation on how 2 similar transactions had totally different results.
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You Have Questions? We Have Answers!
Juliana Tu, CSEO, CEO, CBSS, CEI, SASIP
Escrow is my FOREMOST language!
Advance Disclosure:
The opinions expressed in this blog are solely the author’s.
Your comments and viewpoints are always welcome.
Info @ VivaEscrow.com