Home Buying in Los Angeles>Question Details

gill, Home Buyer in 91101

i'm buying a house for the first time. If you don't impound your taxes and insurance to you're mortgage payment should not effect the interest rate?

Asked by gill, 91101 Tue Oct 29, 2013

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Robert Spinosa’s answer
Gill,

Some great answers below, and one other thing to consider if you are not taking a loan that requires an impound account (FHA, VA, greater than 90% LTV). If you structure your loan without impounds you can add them later. The servicer will do an escrow adjustment and your payments will change accordingly and usually via a few options to fund the escrow account.

But...if you take a loan with an impound account at origination, you cannot have it removed in the majority of cases. The loan is securitized that way.

Rob Spinosa
rspinosa@rpm-mtg.com
0 votes Thank Flag Link Thu Oct 31, 2013
BEST ANSWER
Your question appears to be incomplete, but if I understand it, no the taxes and insurance do not affect your interest rate. Your principal & interest is calculated against the amount of your mortgage debt. Taxes and Insurance are added on after and are held in a separate escrow account.

As for the impounds at closing, you will likely have to place 3-6 months in the account to satisfy your lender. However, not all lenders will require it, so you just have to work with their guidelines. It depends on several factors, including your down payment, loan type, etc. Discuss it with your lender.
0 votes Thank Flag Link Tue Oct 29, 2013
.125 to .25 goes to discount, not to the rate and not in CA.
Flag Tue Oct 29, 2013
Hi Gill,
In actuality, your loan payment will be slightly higher WITHOUT an impound account. This is because when there's NO impound account a tax lien can jump get ahead of the mortgage lien if the Buyer falls behind on payments.

Likewise, by impounding the property insurance the lenders know there will be enough coverage to protect the property (and thus their collateral).

For these assurances there is a slight benefit to the loan broker, and hence, the construction of the borrower's final quoted rate. Roughly, as I remember it, NOT having an escrow/impound account added approximately .150 to .250 to the rate and depending on the lender.
-Steve
Flag Tue Oct 29, 2013
It appears you are buying in Los Angeles. If you are, you will not be charged a fee to waive escrow impounds, California doesn't allow it. Please note however that some lenders get around this by pricing their loans as if everyone was waiving impounds and offer a credit to those that do impound. The fee for waiving impounds does not affect the rate, it affects the points. The fee of .125 to .25 is the cost to acquire the rate. For example, if you were getting a 4% rate at par, meaning at no cost, you would not have to pay .25% of the loan amount to get the same rate. Again, this doesn't apply in CA but what you may see is the 4% rate with a cost of .25 unless you decide to impound and then you would get the 4% at no cost.

It's a shell game of sorts and quite silly but the bottom line is that the answer to your question is yes and no. Please also note that California law does not allow a lender to force impounds if your LTV is under 90%, not 80% as in most other states. By under 90% I mean 89.9%. At 90% you must impound. Smart loan officers rarely write loans in CA at 90% LTV for this reason, it gives consumers more options to structure it at 89.9%
1 vote Thank Flag Link Tue Oct 29, 2013
Credit scores matter the most on interest rate, loan to value, and downpayment. When your loan is higher than 80% of the purchase price (most of the time) your lender will require you to escrow tax and insurance. Having that higher loan to value, you also have to pay a higher interest rate.

So if you must escrow insurance and tax because of low down payment or whatever reason, work on perfecting your credit first to get the lowest interest rate possible.

Check this link below for more info.
1 vote Thank Flag Link Tue Oct 29, 2013
Gill,

There is a difference, because lender do prefer collecting and then paying taxes on your behalf.
If your loan was locked with an impound/escrow account, you might still have the opportunity to opt-out at a cost of one eight to a quarter of a percentage point.( on a loan of 300K, this will represent a fee of $375 to $700)
We usually cover it for our borrowers, but some lenders might charge you for it (or, which will be extreme increase your rate)

Cheers,

Thierry Abel
Senior Loan Consultant
All California Mortgage
A Division of APMC
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
E: tabel@allcalifornia.com
NMLS 304353 - BRE 01380701
1 vote Thank Flag Link Tue Oct 29, 2013
Hi Gil,

Yes that is correct. Getting it impound however will make your monthly payment and obligation a little easier to handle because they are all in one bill. You wont have to think about taxes every six months and the insurance payment will be part of that.

If you have further questions or needing assistance in locating that house you're looking for. Feel free to call me at 323-500-7690.


Charles Nierras
Sellstate Preferred Properties
17207-2 Ventura Blvd. Encino, CA 91316
http://www.nierras.net
CA BRE 01935066
1 vote Thank Flag Link Tue Oct 29, 2013
Hi Gill,

In California, impounds are only required if your loan-to-value is 90% or more or if you're getting an FHA loan or a VA loan.

Some lenders will charge 0.25 point for not having impounds.

Best regards,

Elva A. Wormley
Mortgage Consultant
(408) 615-8500
C2 Financial Corporation
2845 Moorpark Avenue, Suite 209
San Jose, CA 95128
NMLS #331981 / DRE #01274093
1 vote Thank Flag Link Tue Oct 29, 2013
You always get better pricing if you have impounds. It is less risk to the lender so they reward you for it.

Alex Greer
Loan Officer
NMLS #1056079
http://www.TheMortgageOutlet.com

408-352-5147
AGreer@TheMortgageOutlet.com
1 vote Thank Flag Link Tue Oct 29, 2013
HI Gill

some lenders has price adjustment on impound account which they give you benefit if you have impound account.

Omar Khamisa
Mortgage Loan Manager
Omar@MSJMortgage.com
NMLS#: 369325
Cell: 510-648-5535
0 votes Thank Flag Link Fri Nov 1, 2013
Sometimes it does. Some lenders will give you a better rate if they do.
0 votes Thank Flag Link Wed Oct 30, 2013
If you are doing a FHA loan you no choice but to impound. You are changed interest on the principle loan amount only. If you go conventional you can choose if you want impounds or not.
Some people like to hold onto their money and pay taxes and insurance themselves. Others like to send one payment and know the lender will pay them for them.
0 votes Thank Flag Link Wed Oct 30, 2013
IT DEPENDS ON THE LENDING INSTITUTION, I WORKED FOR SEVERAL OF THE
LARGE BANKS.
0 votes Thank Flag Link Tue Oct 29, 2013
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