Nov 10, 2018

Should you make your last house payment?

A reader asks: “Should I make my next mortgage payment before my house closes? We are under contract and scheduled to close on the 14th of the month. “ 
This is a fairly common question for title companies. And the answer depends on your closing date and time.
Before closing, the title company will order a ‘payoff’ from your current mortgage company. After confirming and calculating what you owe on your current mortgage, we deduct that amount from your proceeds at closing and send that payoff amount to your lender.
For most folks their mortgage payments are due on the first of the month. And they are considered late on the 15th of the month. That kind of makes your situation a little more complicated.
In a perfect world, you and the buyer would sign papers in the morning, the buyer’s lender would promptly review and approve all documents, and send funds to the title company. Then the title company would quickly disburse funds and pay off your mortgage before the mortgage company’s  afternoon wiring deadline. But in real life, it doesn’t always work that smoothly. One or both of the parties could be signing in the afternoon, funding approval could take a couple of hours, etc.
For that reason, many title companies schedule the payoff amount based on the day after closing. If your closing is delayed or the payoff is not received before your late date (likely the 15th), you could incur a late fee. But let’s presume everything is on time and the title company has the payoff amount correct.
“My advice would be if you have not made your payment for the month and you are closing on the 14th then your payoff with title already includes the interest due for November. So it is ok to not make the payment even up till the end of the month as long as the loan funds in November and the payoff is wired to the lender,” says Michael Fooshee, Senior Loan Officer at Verity Mortgage.
He warns that you could be charged a late fee if the payoff comes in under the amount due or after the due date. “But your credit should not be affected unless the full payoff or payment wasn’t received by the lender by the last day of the month,” Fooshee adds. “If you are faint of heart, then I would recommend to go ahead and pay the monthly payment.”
“Any over payment made will be reimbursed to you,” says Fooshee. “Also, if you have a positive escrow balance, then you will receive a refund typically 2 to 3 weeks after the loan is paid off.”
Ultimately, you must pay for every day that you own your property and will not pay for the days that you no longer own it. If you overpay, you’ll get money back. If you don’t make that last mortgage payment, you should be okay – as long as everything goes as planned.

The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney, accountant or mortgage officer to obtain advice for any particular issue or problem. [where: 75230]

Nov 3, 2018

It's October Tax Season

For most North Texas homeowners, the 2018 tax statements are out. You may not have received your bill in the mail, but your tax bill is out and due for payment by Jan. 31.

Simply go online and search for your county tax assessor to get your statement before it arrives in the mail. For Dallas County, you can find your statement here.

You’d think property tax bills would be fairly direct: “Here is the property address, here is the tax bill.” But these are government entities. So, let’s see how complicated it really is.

We’ll use Dallas County as an example. In Dallas, you might have Dallas County taxes, Dallas city taxes, hospital district taxes, community college taxes, and school district taxes. You write one check to the tax assessor for the total bill.

But you could live in Dallas County and have Richardson ISD, Irving ISD, or Highland Park ISD taxes instead of Dallas ISD. You might pay taxes to the City of Farmers Branch or DeSoto instead of the City of Dallas. There are various combinations of taxing entities in every county of North Texas.

Here’s where it starts getting complicated. The 2018 Dallas County taxes are posted — except for Dallas ISD. Those won’t be finalized until after the election on Nov. 6. A few other entities here and there haven’t posted their 2018 tax bills as well. And we don’t know exactly when they will post them. It might be tomorrow, it might be in two weeks. A property owner doesn’t have a correct amount due until the tax statement is released by their tax jurisdiction.

This wouldn’t matter much if title companies didn’t have to prorate taxes between buyers and sellers and give accurate tax information to mortgage companies. To explain:

Typically, when you sell your property, the title company pays off your mortgage and other liens from the proceeds of the sale. They also prorate the current year taxes between buyer and seller. For example, if you owned your home 100 days in 2018, then the title company would withhold 100 days of property taxes to be used to pay the taxes at the end of the year. Typically, this amount is charged to the seller and credited to the buyer on the closing statement. But that changes this time of year.

Understandably, mortgage lenders want assurances at closing that there are no unpaid taxes on the property. Title companies issue title insurance that includes endorsements to the lender that there are no outstanding ‘due and payable’ property taxes. It’s part of their job to verify payment of taxes and issue title insurance accordingly.

Let’s take a step back and look why this is so important. In Texas, unpaid property taxes can cause huge issues. The main issue being foreclosure on the property if the taxes aren’t paid.

Remember what I said earlier? Your 2018 tax bill is out and is now due and payable. Or at least part of your tax bill is out and is now due and payable. It depends on where you live. Those taxes that are posted are collected and paid at closing.

It’s not too difficult to prorate those between buyer and seller. But the taxes that haven’t yet been posted (like DISD taxes) fall into a separate category and must be handled differently. How those are handled depends on the mortgage lender, the title company, the buyer and seller.

Title companies and mortgage companies are updating closing statements daily based on available tax information as it comes out. Payments made to tax authorities should be based on actual tax statements, not estimates from previous years. If the wrong amount is paid, then who owes more, who get a refund, etc. can become a problem. Refunds are sometimes issued only to who made the payment – the title company. The title company must then determine who gets the refund – we can’t keep it. The bigger issue is collecting if the actual amount owed is more.

That makes for some challenging dynamics when it comes to buying or selling a home this time of year.

Everyone wants assurances that those ‘due and payable’ property taxes are being paid. That requires the title company to collect and pay the property taxes at closing or show proof that the taxes have been paid. That proof must come from the tax office.

The title company and the buyer’s mortgage company rely on a Tax Certificate to show the status of the property taxes owed. If the tax certificate shows a balance is due, then it must be paid at closing.

But wait, there’s more!

Let’s say you’re one of those homeowners that doesn’t like to deal with those pesky property taxes so you have them escrowed and paid by your mortgage company. In that case, your share of the unpaid 2018 taxes will still be withheld from your proceeds at closing and paid on your behalf by the title company. Because most likely, the mortgage company hasn’t paid those taxes yet. And when your sale closes and the loan is paid off, they may not pay those taxes. The title company must ensure they get paid. Your mortgage company will refund the amount in your escrow tax account after closing.

Couldn’t the seller simply pay their tax bill prior to closing and give the title company a receipt as proof of payment? No. We must have an updated tax certificate that shows a zero balance for taxes. Otherwise, a seller could make a tax payment by check or credit card, obtain a receipt from the county and then stop payment on the check or dispute the credit card charge.

For the folks buying or selling their properties right now, it requires communicating with the title company and their lender to alleviate surprises at closing. Many sellers don’t expect to pay their share of the taxes at closing when they are already being escrowed by their mortgage company. Likewise, some buyers don’t want to be surprised to find they must bring more funds to closing to pay their portion of the 2018 taxes now. But these scenarios are common.

It can be a taxing time of year for buyers, sellers, lenders, and title companies.

The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem. [where: 75230]

Oct 27, 2018

9 Ways to Save Money on your Real Estate Closing

Closing costs vary from state to state. And in Texas, they can vary from sale to sale. It may be surprising to see where you can and cannot save on your real estate sale or purchase.
In Texas, title insurance rates are set by the Texas Department of Insurance. The rate is based on the sales price of the property. Many buyers and sellers believe that shopping around for a title company will save them money. But, title companies must charge the rate mandated by the state.
However, there are still some ways to save on your closing. How to save on your closing costs:
  1. Provide a valid and usable survey. The cost of a new survey for a typical Dallas property can run $450 to $650. If the seller can provide a good survey and survey affidavit, then it can save buyer or seller the expense of a new one.
  2. Don’t have an HOA. Properties with mandatory homeowner associations require a resale certificate and often have transfer fees. I’ve seen these range from zero to $1,200.
  3. Don’t use a Power of Attorney or Mobile Notary Service. The POA must be filed and recorded with the paperwork and incurs recording fees. If the title company has to hire a mobile notary to close at your location, they may pass the $150-250 expense on to you.
  4. Pay cash for the property. This saves on lender required title policy endorsements and lender fees. You’ll also save the cost of recording the mortgage lien with the courthouse.
  5. Lower the Sales Price – The lower the sales price, the lower the title insurance. To save on the title insurance, you could reduce the sales price and make up the difference with the buyer paying some of the seller’s closings costs. For example, the title policy for a $205,000 cash sale is $1,457. If the price was lowered to $200,000, the policy would be $1,429. It could save $28 if the price was reduced from $205k to $200k and the buyer could pay $5,000 of the seller’s closing and moving expenses to account for the difference. Be careful though. It could make the deal more complicated than it’s worth and end up costing you more.
  6. Shop for your mortgage. Lender fees vary for the application, processing, credit report, appraisal, flood certificate, etc. Consider rolling the lender fees and into your mortgage. Some buyers prefer to pay points or higher lender fees at closing to reduce the interest rate on their mortgage. In exchange for the increase in upfront costs, it usually saves them money in the long run. If you’re willing to increase your mortgage interest rate, you may save on lender closing fees.
  7. Avoid paying for mortgage insurance by putting at least 20% down on the property.
  8. Don’t escrow your taxes and insurance costs into your mortgage payments and you can avoid paying for those expenses in advance. But be sure to have the discipline to pay them annually outside of your monthly mortgage payments.
  9. Compare escrow/closing/settlement fee and the attorney fees for preparing documents, deeds, etc. These fees can vary between title companies. However, they are typically within $25 to $200 of each other. I’ve seen escrow fees at one title company that were $100 lower than the competition, but their doc prep fees were $150 higher than the other guys.
Where you can’t save on your closing costs:
  1. Title insurance policies cost the same across Texas. Title companies cannot legally reduce or increase their rates for you.
  2. Courier/FedEx fees. Sorry, but we can’t let you deliver the signed documents to the mortgage company, courthouse, etc. Our fiduciary duties to all parties exceed our trusting you with these important documents.
  3. Government fees for recording documents. Counties charge by the page for filing and recording deeds, releases, etc. They don’t discount their fees.
  4. Home warranty, broker commission, and other items agreed upon in your contracts. If you agreed to pay for these items in the contract, then expect to pay them at closing.
  5. Taxes. Property taxes are prorated based on how many days of the year each party will own the property. Both buyer and seller must pay their share of the estimated taxes. Typically, the seller’s share of the unpaid taxes are withheld at closing and credited to the buyer to pay when they become due.

The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal or tax advice. Contact an attorney or accountant to obtain advice for any issue or problem.
[where: 75230]