Q: Should this be right? Bought a newer house in 11/06 seller paid taxes for 2006 which was on vac land.
We were given a credit of 1077.00 on our settlement statement and charged 1633.31 as part of our closing costs for 7 months of prop taxes (im guessing first 7 months we owned property) . Then when we actually moved in the property taxes were actually over 4800.$ that we paid which made our escrow go negative. So we paid for over 4800.00 in taxes on a house that we did not own at the time nor live in. How after only less then 2 months of owning this house be already negative for property taxes when we did not live or own the house. And they were already paid from the seller.
A: You pay property taxes the year AFTER the taxes are incurred, i.e. the first half of 2005 taxes are not due until January 2006. So your seller probably did not pay 2006 taxes, but rather paid 2005 taxes that were due in 2006. I would also guess that the seller built the house. This issue comes up often on new construction. When the real estate taxes are estimated for your loan escrow, the tax amount is based on the available county tax information. Since the available tax info did not include the value of recent improvements (which won't be caught until a transfer or at the triennial valuation), the taxes appear to be low. This is quite misleading by the lender. They can estimate the taxes based on sales price to give you a far more realistic escrow figure. I would guess that the lender was trying to qualify you for a loan at the edge of your ability to repay (as determined by their underwriting criteria). Had the lender used the projected taxes, you may not have qualified for the loan because your monthly payment, which included the more realistic, higher tax figure, would have increased your payment beyond that which the underwriting criteria permitted.
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