When a construction loan is to go to perm, how do you estimate tax payments for escrow?

For the most accurate assessment, wouldn't it be prudent to multiply the current tax rate by the appraised value of the new property?

Some of my lenders want to use 80% of the appraised value. To me, this gives the appearance of manipulating the monthly payment to enable the borrower buy "more house"....qualify for a bigger loan....which in turn makes more money for the mortgage lender.

Additionally, this might result in payment shock later, and I think might fall into the UDAAP arena. Am I over-thinking?

I would welcome any comments.

Does anyone have an opinion on this?

Are your lenders thinking 80% of appraised value is roughly equal to assessed value? I've never seen this before.
While I'm not fluent enough in UDAAP to speak to your concerns, I do agree that this is just the type of lending that started the onslaught of regulatory overseeing we have to deal with now.
You have two choices.
Either set up the escrow based on the currect tax amount and give a payment shock letter
OR
set up the escrow based on a projected tax amount. We've always used appraised value x mil rate.

Thank you, Truff. In one market, the 80% might be justified. But in the other two markets, appraised value and tax value are fairly in line.

And since I've never dealt with this before, I'm completely ignorant. Is the "payment shock letter" part of RESPA? Is there model verbiage for it?

I very much appreciate your help.

Isn't the first year the house is finished still taxed at the unimproved rate? If so, wouldn't you be over collecting to start out at final appraisal x mil?

Hmmmm.....I don't know. I'll have to find out.

Joker, it all depends on how quickly the property is assessed. Some states may take a year or more. Others may have it done within a couple of months. If you're talking construction perm, you could need more than just the unimproved rate.

swiggles, no there's no model verbiage altho I do think Dan put something out there within the last couple years. You might try searching under his name and payment shock.

Thanks, Truff.....there IS model verbiage in the Federal Register but it wasn't codified. Thanks for sending me that direction. I did find Dan's thread.