In a couple weeks, King County along with others, will begin posting property tax bills for 2015. This may be a non-event for most…unless you’re in the process of buying a home and your debt-to-income ratios are tight. It’s possible that should the tax assessor decide the home you have a contract on now or during the next month has a higher value, and therefore a higher tax bill, that this may jeopardize some loan approvals and/or transactions.
Many mortgages have a 45% debt to income ratio (DTI). If the new property taxes for the home you are buying pushes your ratios outside the 45% limit, your loan may no longer be approved – even if you are already in contract. As property taxes are part of your mortgage payment, they are factored into the debt-to-income ratios. Even if you have opted to pay property taxes separately, they are still factored into your DTI. Your preapproved or approved status is based on data that is currently available. Whenever that data changes, whether it’s property taxes, your income, employment or credit, it may impact your loan approval.
With local home values on the rise over the past year, I would be surprised to see many tax assessed values not follow that trend.
If you are currently in contract to buy a home that’s closing in the next few weeks, here are a few suggestions:
- Contact your mortgage professional and find out what your debt-to-income ratios are. If you’re well below the 45% limit, you’re probably not going to be impacted by the 2015 property taxes.
- If your ratios are tight, you can talk to your mortgage professional about what your options are if there is a risk you may no longer be qualified, including buying down your interest rate or shopping for more affordable home owners insurance.
- Talk with your real estate broker to see when your financing contingency expires and discuss your concerns.
- On or after February 13, 2015, when King County is revealing 2015 property taxes, you can contact your mortgage professional for an updated quote with the new property taxes for your home.
I’m not trying to scare anyone – I just don’t like surprises during a real estate transaction. The adjustments to the property taxes on the home you are buying may be small enough to not make an impact…but I feel it’s best to be prepared and armed with knowledge. According to this report, King County anticipates that 65% of homes will see their property bill rise.
If I can help you with your home purchase or refinance on property located anywhere in Washington state, please contact me.
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