Good Morning. It saddens me that your lender did not explain all fees on your GFE.
Reserves are deposited with the lender to create a cushion for any overages that may arise when the insurance and tax bill become due. Your mortgage payment is made up of PITI (Principal, Interest, Taxes, & Insurance). You paid your homeowners insurance upfront for the year, and will be paying a monthly fee to the lender with your mortgage each month for the policy that will become due in 12 months. All lenders require 3 months reserves to be deposited into this account. Each payment will go into your escrow account. You will have an escrow for Taxes and Insurance. You are not paying your insurance on a monthly basis directly to the insurance company as you would on a vehicle. Home Owner Insurance Policies are very different than that of a vehicle policy which is paid monthly.
You are thinking on monthly terms, you need to look at your home owners insurance and property taxes as being due yearly and paid on a yearly basis with one payment, which your lender will make the payment for you with the money you have deposited into the escrow account.
Therefore from the date you close you are insured for an entire year, with a policy paid for the entire year. Each monthly payment is to secure the next years policy in full.
Same goes for your Property taxes which are due in full once a year.
Have a great weekend.
CEO & SR Credit & Mortgage Consultant of
Ex-Mortgage Broker of more than 10 years
i have received lots of emails from brokers in similar situations and i thought i would share them. The issue with ken is similar in that we are waiting for a signed deed to come from the bank to conduct the closing. In Ken's case it is a little different as the bank that signed the purchase and sales was taken over just before closing. The deed they sent to closing wasnt accepted by the title company that represented the buyers mortgage company. We waited 2 weeks for a new deed and then 2 more weeks to get the deed to the bank to sign and 2 more weeks for the bank to sign it and get it back. There is twice daily emails to the attorney, the assett manager and to the parties involved yet we wait for the deed to come.... more