At Mortgage Specialists, our commitment to clients extends well beyond loan approvals. We aim to be your trusted partners throughout the multifaceted journey of homeownership. In our efforts to demystify the intricacies, we dedicate ourselves to providing insights into crucial elements like property taxes, insurance, and escrow. These components not only affect individual home loans, but also contribute to the entire housing market. Join us in this blog as we dive into the realms of property taxes, insurance, and the important role of escrow.
Taxes
You know the old saying about how two things in life are certain, death and taxes? Well, property taxes are an integral part of homeownership, and understanding tax implications is essential for borrowers and lenders. The amount of property tax can vary significantly based on location and property value. In Omaha, anyone can look up their property value on the Douglas County Assessor’s website. As mortgage lenders, we work closely with borrowers to estimate property tax payments accurately (assessed value multiplied by tax levy). Keep in mind that since the housing market is constantly changing, property taxes also change. Just another reason to pay attention to the trends when budgeting for potential changes in property tax assessments!
Something to keep in mind:
- Omaha collects property taxes differently. Omaha homeowners pay the previous year’s taxes in the current year and treat them as current.
Insurance
Homeowners insurance is a non-negotiable safeguard for lenders and borrowers. It protects against unforeseen natural disasters, theft, or accidents. Mortgage lenders often require borrowers to maintain adequate coverage to protect the collateral (the home). As a lender, ensuring that insurance premiums are up to date is crucial to protect the financial interests of all parties involved in the loan transaction. Similarly to the housing market, the insurance world is also constantly changing. That’s why mortgage lenders play a pivotal role in guiding borrowers towards comprehensive insurance coverage. Not only so our lender requirements are met, but also so that the homeowner’s investment is protected. At Mortgage Specialists, we are able to collaborate with insurance professionals in order to stay ahead of the curve and provide the best service possible to our clients!
A few things to keep in mind:
- We like to quote on the high end so there won’t be any surprises.
- All lenders will make you pay a year’s worth of insurance in advance.
Escrow
Escrow accounts serve as a kind of middleman, holding funds for property taxes and homeowners insurance. They benefit borrowers as they offer a convenient way to budget for these recurring expenses by spreading the payments over the year. Lenders also benefit from escrow because ensuring that these obligations are met reduces the risk of loans defaulting due to unpaid taxes or lapsed insurance. As market conditions change, adjustments to escrow account contributions may be necessary. At Mortgage Specialists, we typically give our borrowers one to two months notice before their payments change.
A few things to keep in mind:
- As you make mortgage payments, money goes into your escrow account to cover things like insurance and taxes.
- 8 months worth of money for taxes and 3 months worth of money for insurance (a year being charged upfront) is usually the correct amount of money in an escrow account.
Final Thoughts
As a reminder, taxes, insurance, and escrow are intertwined partners in homeownership. As mortgage lenders, we play a crucial role in guiding borrowers through the complexities of these components. That’s why we make it top priority to stay informed about market dynamics, insurance trends, and escrow management best practices. As a top priority, we strive to contribute to the financial stability of our clients and in turn, positively impact the entire housing market.
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