Property Taxes - Property Taxes
This is the one closing cost that is often prorated between the buyer and seller. If the seller has already paid the annual property taxes, the buyer typically reimburses the seller for the period in which the buyer will be occupying the property. Likewise, if the taxes have not yet been paid, the seller typically reimburses the buyer for the period in which the buyer occupied the property.
Transfer Taxes and Recording Fees
This is the cost for transferring ownership of the property and recording the purchase documents. The fee is often calculated as a percentage of the sales price.
Property taxes are determined by the value of the homes. As most homes have appreciated in value in recent years, most homeowners have seen their property taxes increase. Homeowners have the right to challenge the assessed values of their homes. They will need to provide sound reasons to support their arguments.
If you do a refinance transaction and one of your property tax installments is due within 60 days of your closing, most lenders will require that the tax installment be paid before funding. You may also use any proceeds from the refinance to have it paid by escrow or the closing agent.
On all conforming loans that have a LTV (Loan to Value) of 80.01% or more, property tax escrows are required. This means that you need to have your property taxes included in your monthly payment. If you are at 80% LTV or below you have the option to not escrow for property taxes (not inlcude them in your payment), however you will usually have to pay a .25% fee to not escrow them.
With many conventional, conforming loans you will be required to pay 1/12 of the annual taxes every month.
This money will be kept in an escrow account and will be used to pay the taxes as they come due.
Every state is different when it comes to property taxes.
Property Taxes - The property taxes for a new home purchase is determined by state or county assessors office and are based on the assessed value of the property.
Assessment values and property taxes for one to three family house are determined by sale prices of similar, recently sold homes. New construction homes and specialty properties are valued base on the replacement costs. The assessment values of condominiums and cooperatives are estimated as if rental apartments. The estimated rental incomes of the units are used to determine the assessment values.
If you escrow your taxes, you should always verify with the town tax collector that the lender has, indeed, paid the taxes when due. It is always the property owner's responsiblity to be sure that the taxes are paid, not the bank's. While it is rare that a bank will miss a tax payment, it has happened.
You can pay your tax's by escrowing or by paying them in full at the end of the year. If you escrow your tax's are sent in monthly with your payment and held in an escrow account by your lender. The lender then pays the tax's for you at the end of the year. If you do not escrow you have the opportunity to invest your money all year and profit from it. You do not have that opportunity by escrowing.
Although no one seems to like paying more taxes, the government and the United States Constittution prohibit you from paying taxes on top of other taxes. What this means is that what you pay in property taxes can be deducted from your personal income tax. Having more itemized deductions in some cases can actually move you into a lower tax bracket and lower the percentage that you pay in income taxes. Another tax benefit of home ownership.
Property Taxes Explained - There are many, many misunderstandings and misconceptions about property taxes. Very often, property taxes are the reason your actual closing statement look different than your Good Faith Estimate.
It is important to stay up on your Property Taxes. Refinance loans can sometimes be held up, due to Property Tax liens that the homeowner was unaware of.
One thing to keep in mind is that when you refinance your home, the lender will normally require any property taxes that are due within 90 days of the funding of the loan to be paid. These taxes will normally be paid through the proceeds of the loan by the settlement agent at closing. If you want to pay them outside of the loan it is best to pay them to the settlement agent rather than paying the tax collector. Your mortgage professional can explain why this will help expedite the closing of your loan.
You want to make sure there are no back taxes due on a property when you are cionsidering purchasing. Thsi is espcecially important in states wher ethere are options for no escrow.
Each state handles property taxes differently. In California for example there is proposition 13. This makes the homeowner responsible to pay taxes for the purchase price of the property. Regardless on how much the home appreciates they will only pay taxes on value at the time of purchase.
You may have the choice as to whether or not to escrow your property taxes. If you elect to pay the taxes yourself, your lender may charge you a slightly higher interest rate.
The taxable value of real estate is the basis of secured property taxes. Property taxes are calculated by multiplying the property's taxable value by the tax rate for the area where the property is located.
Example: $300,000 (taxable property value or assessed value
x 1.5% (tax rate for area)
= $4,500.00 (property taxes)
Property Tax is prorated at the closing table between the home buyer and the home seller. If the seller has paid the full tax amount for the entire year, the buyer has to reimburse the seller for the remainder of the year. If the seller owes real estate tax in the year, then the seller reimburses the buyer for the period the seller has occupied the property.
Some lenders may not disclose the property taxes on their good faith estimates for various reasons. One reason is that escrows are typically not known until you settle on a closing date.
