Home Buying in 76040>Question Details

Crystal C, Home Buyer in Bedford, TX

I am looking @ buying a home. I have been prequalified for a FHA loan. Do all FHA loans have to have the taxes inlcluded in the monthly payment?

Asked by Crystal C, Bedford, TX Mon Nov 8, 2010

The initial fees worksheet that I was given by the mortgage specialist has the taxes added into my monthly payment, which means I have to get less house. When i asked if I could have them backed out she said I could not with a FHA loan; she said they had to be included in my payment.

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Yes your Loan Officer is correct any FHA and many conventional loans are requiring the Escrow for your taxes and insurance. The only way to avoid this from my understanding is putting a large amount down ie 10 to 20%... If yall have not started looking for homes yet with a Realtor I would be happy to assist. I offer informed professional services and give 20% of my commission back to all of my buyers.

thanks for your time
RJ Avery
214-682-0598
0 votes Thank Flag Link Mon Nov 8, 2010
Crystal, either way you would still be able to afford only X amount of home. The taxes have to be figured into the debt to income ratio, so when your mortgage specialist is figuring how much home you can afford, they have to figure in the taxes because that will be a debt and your responsibility. (It is much easier on the home buyer to have them included in the monthly payment because you don't have to worry about them at the end of the year.) Hope that helps. If not please just let me know at truvaluerealty@gmail.com and I'll try to explain further. Thanks and good luck!!

Jackie Rankin
Tru Value Realty
1 vote Thank Flag Link Mon Nov 8, 2010
The answer to your question is yes you must impound taxes and insurance in your total payment. FHA loans require escrows for the life of the loan. It will not effect the amount you would qualify for as the Lender would need to take the monthly escrows into account when reviewing your qualifing housing ratios. This ratio is calulated as: Principle + Interest+Escrows/ gross monthly income. Hope that helps!
1 vote Thank Flag Link Mon Nov 8, 2010
No involved in the conversation difficult to render full opinion HOWEVER no matter whether it is rolled in FHA loan OR you pay taxes still needs to be configured into your monthly debt / income ratio.

It is much safer for anyone to escrow insurance and taxes therefore when you have tax bill due at end of year for $x,xxx you are not "stuck with tax lien on your property"

Happy to assist you with our home search

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
1 vote Thank Flag Link Mon Nov 8, 2010
Having an escrow account does not mean that you'll get less house. Your taxes and insurance are going to be included in your total debt to income ratio whether you have an escrow account or not. FHA is a great program... there are streamline refinance options if the rates go down (though right now, they are at all time lows).
0 votes Thank Flag Link Thu Feb 14, 2013
All FHA loans require that they pay taxes and insurance and MIP in the total housing payment. If you do not want to include an escrow account, you'll need to qualify for a conventional and place 20% or more down. My suggestion would be to get the FHA loan, wait for the values to go up, and refinance into a Conventional. You could also wait 5 years for the MIP to fall off, but you'll still have the escrow account no matter what if you stay with FHA.
0 votes Thank Flag Link Thu Feb 14, 2013
Mortgage lending is about evaluating the risk the borrower won't be able to repay the loan. Generally, the value of the property backs up the borrower's ability by being more valuable than the loan. If they foreclose for non-payment, they should get their money back by selling the collateral (your property).

In evaluating the borrower's ability to pay, they look at your history of paying on your various accounts to see if you seem to take your loans seriously. They look at your income to make sure you earn enough money and are expected to remain employed for the foreseeable future.

As a rule, the evaluation takes the amount of income and compares that to your current debts plus the amount for the proposed loan to get the house, and years of lending experience teaches that around 40% of gross income is the maximum that banks will allow you to pay for the old debts plus whatever it costs for your new home.

This includes homeowner's insurance, taxes, mortgage insurance, owner association dues, and the repayment of principal plus interest.

Even if you could find a lender who did not require an escrow account to hold the tax and insurance money for payment when due, they all factor in the cost when evaluating your ability to pay back the loan. While it is true that FHA requires the escrow account for taxes and insurance, most conventional lenders do, too. And, as mentioned, all of them still consider the total housing payment, not just the principal and interest payment on the loan. your total payment is P+I + T + I + MI + HOA, usually referred to in its shortened form PITI.
Web Reference: http://www.Mortgages-TX.com
0 votes Thank Flag Link Thu Nov 11, 2010
The requirement is that any loan with less than 20% down (even conventional loans) require the setup of an escrow account. All mortgage loans are qualified based on the full payment including taxes and insurance but you can only waive the escrow account when you have a loan to value of 80% or less.
0 votes Thank Flag Link Tue Nov 9, 2010
I believe it will depend on the lender, but in most circumstances YES. I also recommend this. Too many people have had troubles without this.

Why would you not want the taxes and insurance put into escrow?

Bruce Lynn
Keller Williams Realty
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Tue Nov 9, 2010
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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Crystal,
It is required that you have an escrow account for paying taxes and hazard insurance. And, as a local Realtor in DFW for the last decade, I highly suggest you go that route anyway. Too many people purchased homes in a loose fashion for too many years - allowable as it was - and lost those homes because they couldn't save along the way to pay for taxes and insurance outside of their mortgage. An FHA loan requires some down-payment by you, some pre-paid closing expenses, and an escrow account. It's a great loan program. Buy less house and be happy that you are buying in DFW where you can get more house for your money than you can in many other regions of the United States.
Have a blessed day!
Ronda
0 votes Thank Flag Link Mon Nov 8, 2010
Yes,
It is required that you 'escrow'(add taxes and insurance to payment) when financing with FHA
0 votes Thank Flag Link Mon Nov 8, 2010
Taxes are always figured in to your debt ratios regardless if they are included in your mortgage payment or not. Conventional loans do not always require escrows depending on how they are structured or the down payment that is made. FHA loans always have escrows included in your monthly payment.

Also note that just because you can qualify for a loan amount does not mean that is how much you should spend that much. As a Realtor and a Mortgage Broker I constantly speak with people who are "house poor". If you could afford more house not including the tax and insurance payments how would you come up with the money each year to pay your taxes? Sure you may be able too but many people have bought too much house without escrows and have then realized at the end of they year they do not have enough to pay the taxes on time. Believe me you do not want to get caught up in that. The penalties for paying your taxes late are awful.

So again to answer your question... even if taxes are not included in your payment each month the lender includes them when they qualify you for a loan.

Good luck on your home purchase.
0 votes Thank Flag Link Mon Nov 8, 2010
When you are saying that you can buy less of a house, are you saying this in terms of qualifying, or because you will have less money to put down?
Others below have answered your question, although I will be more clear. Unless you put down 20%, you will have to escrow. The things that are included in your debt ratio are principal and interest on your loan, property taxes, homeowner's insurance and mortgage insurance, plus any homeowner's association dues if there are any. By not putting them into your payment, it doesn't mean that you can qualify without them. The only thing that is now required, but doesn't go into your payment, is the HO6 policy on a condo.
Has anyone discussed the idea of trying to do a seller's concession with you if you want to use more of your own money for a down payment, or have less to work with?
0 votes Thank Flag Link Mon Nov 8, 2010
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