Understanding How Lenders Estimate Property Taxes: What You Need to Know

When you’re applying for a loan, understanding the various costs involved is crucial. One of the significant components of homeownership is property taxes, which can have a significant impact on your monthly payments. However, it’s essential to be aware that property tax estimates can vary among lenders. In this blog post, we will provide you with insights into how lenders estimate property taxes, empowering you to make informed decisions when comparing quotes from different lenders.

Confirming Taxing Authorities:

To begin, lenders need to confirm the taxing authorities associated with a property. This typically includes county taxes, but in some cases, city taxes may also apply. As a customer, ensuring that your lender is quoting all appropriate taxes is important. When comparing quotes from different lenders, ask them to specify the taxing authorities they have considered. Doing so gives you a clearer picture of the overall costs involved.

Using Correct Tax Rates and Property Value:

Lenders should utilize tax rates specific to the area where the property is located. These rates can vary depending on the county and, in some cases, the city. Lenders should consider the property’s value or sales price to estimate the taxes accurately. If the property has undergone recent construction or renovations, the post-construction value should be used for estimating taxes. Otherwise, the current value or sales price is typically considered.

Seeking Expert Assistance:

As a customer, don’t hesitate to reach out for help if you have any uncertainties regarding the amounts estimated for property taxes. Your lender should be available to address your questions and provide guidance on tax rates and estimations. You can also contact the closing attorney with these questions or research tax rates with the local taxing authorities.

The Importance of Accurate Tax Quoting:

Accurate estimation of property taxes on your Loan Estimate is key, as it directly affects your proposed monthly payments. When comparing quotes from different lenders, be sure to review the tax estimates provided. Discrepancies in tax quotes can lead to unexpected increases in your monthly payment, impacting your overall budget. Therefore, it’s essential to consider not only the total payment quoted but also the items that make up the payment, including principal, interest, insurance, and estimated property taxes.

Conclusion:

As a borrower, understanding how lenders estimate property taxes empowers you to make informed decisions when comparing quotes from different lenders. Confirming the taxing authorities considered, understanding the tax rates and property valuation methods, and seeking expert assistance when needed are important steps to ensure accurate tax estimates. Remember, when evaluating loan offers, don’t overlook the importance of property tax estimates and their potential impact on your monthly payments. By being knowledgeable and proactive, you can confidently choose a loan option that aligns with your financial goals.

At BankSouth Mortgage, we are committed to providing accurate and transparent information. If you have any questions or need further assistance regarding property tax estimation, please don’t hesitate to reach out to our team.