Home Buying in East Orange>Question Details

Larry, Home Buyer in East Orange, NJ

I just closed on a condo in New Jersey. The amount I have to pay into the escrow is too high. What can I do to bring this number down.?

Asked by Larry, East Orange, NJ Fri Jan 28, 2011

I pay into escrow for Insurance and Property Taxes.

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Joanne Bernardini’s answer
It seems you are surprised by the amount you have to escrow. These numbers are established by the lender and cover taxes and insurances on the condo for the year. You should have been made aware of this before closing when the HUD-1 sheet was explained to you.The bank does this to make sure they are protected by insuring the property remains properly insured against fire (and flood if needed) and that no tax liens are placed on the property for non payment. Add up the taxes and insurance for the year and divide by 12. That should give you what you need to pay into escrow each month. If there is a significant difference call the lender and ask for an explanation. If it is a mistake they should correct it. If they don't you should get a refund at the end of the year or an application of the excess to the next years escrow charges with a downward adjustment to your monthly escrow fee. If you were made to supply the lender with a one year paid in advance policy for fire and flood, consider that you are now paying monthly amounts that will allow the bank to pay for the next year policy when it comes due. Is the lender also collecting and paying your monthly Home Owner's Association fees in this escrow? That also should have been clearly spelled out prior to settlement. Chances are you are not going to be able to convince the lender to let you pay these fees yourself. They are protecting their investment in the property.
0 votes Thank Flag Link Sun Dec 18, 2011
Hi Larry,

Depending on your lender, you might be able to get away with not escrowing for taxes and insurance. Keep in mind if you are able to do this, you will have to pay your quarterly tax bill and monthly insurance bill in addition to your mortgage.
0 votes Thank Flag Link Fri Jan 28, 2011

I'm assuming you knew these numbers before closing on the condo. Unfortunately I don't think there's much you can do. When you say "too high" do you mean that taking your escrow amount and dividing it by the 12 months and comparing it to your insurance and property taxes the number is too high (putting into escrow more than what's coming out) or do you mean too high referring to your budget? Unless you insurance and/or taxes are going down, your escrow amount will not decrease. If taxes were to one day go up on your property, eventually the escrow would increase. You can ask your lender to pay a lump sum into your escrow and for them to deduct less each month. Either the way - the escrow must be covered. If you pay less into escrow (which your lender wouldn't allow) and you come up short at the end of the year when your lender provides you with an itemized yearly statement showing your escrow balance, you must either come up with the difference in one shot or break it up monthly thus raising your monthly payment.

Another option which I'm not even sure would be available or a wise decision would be to pay your taxes on your own. That may reduce your monthly payment but every quarter you would need to come up with that lump sum to pay your taxes. Unless you have a job wherein you received quarterly bonuses, you would have to save each month for that quarterly payment which would be the same as it coming from your mortgage payment into escrow.

Gina Chirico, Sales Associate
Lattimer Realty
973-715-1158 cell
973-575-6353 ext 17 office
0 votes Thank Flag Link Fri Jan 28, 2011
You need confer with your lender about escrow Many questions need answers.

If you closed you should have been aware what these payments would have been

Insurance you might be able reduce contact your agent HOWEVER all lenders have certain limits which must be meet.

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes Thank Flag Link Fri Jan 28, 2011
To escrow or not to escrow --- that is the question. Did your lender say escrowing is mandatory with the loan approval you have? It can be convenient to escrow and not have to pay it by check every month, but it's not always mandatory.
0 votes Thank Flag Link Fri Jan 28, 2011
Your lender figures out what the taxes and insurance will be for the year, then they divide by 12 and that is the amount of escrow they add to the loan payment amount each month. If you want the escrow to be lower you might be able to get the lender to adjust the amount they take out each month, but I doubt you will have much luck unless you can show them the taxes will be going down or you can get a cheaper insurance policy with the min amount of coverage the lender requires. It has been my experience that lenders won't work with you much on escrow amounts. Good luck
0 votes Thank Flag Link Fri Jan 28, 2011
Your real estate agent/lawyer or title company should have reviewed the preliminary HUD-1 with you to verify charges prior to closing. Now that the property is closed and impounds taken I don't believe there is much you can do except try and get some refunds on the insurance by reducing your coverage options or raising the deductible. The good news is the insurance, HOA fees and taxes are all paid up and you won't have a house payment for February because you paid that in advance as well.

Good luck,

Sandy Farmer
Realtor, GRI, CSSN
John Hall & Associates
Web Reference: http://homesales411.com
0 votes Thank Flag Link Fri Jan 28, 2011
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