Get The Overview On Escrow Accounts

By
Mortgage and Lending with Bay Equity Bay Equity NMLS #76988

Get The Overview On Escrow AccountsWhether you are purchasing a new home or you are considering applying to refinance your home, chances are the lender will require an escrow account. These accounts are often a source of confusion for homeowners.

In reality, these accounts benefit the homeowner and help protect the lender.

What Is An Escrow Account?

Escrow accounts are sometimes called "impound" accounts. These accounts are set up to help manage payments of property taxes and homeowner's insurance.

Depending on the individual requirements of the lender, you may be asked to pay as much as one-quarter of these upfront and they will be put into the account for the purposes of making payments.

Who Controls Escrow Accounts?

Lenders have complete control over escrow accounts. However, homeowners are entitled to receive an annual statement advising them of their escrow balance.

If there is an increase or decrease in insurance payments through the year, a homeowner may request the lender evaluate the escrow account and change the amount that is paid.

Is Interest Paid On Escrow Accounts?

There is no mandate to pay interest on escrow accounts. When you refinance your home, the funds for your taxes and insurance are calculated into your overall payment.

The portion that is to be used to pay taxes and insurance is placed in escrow. Arizona laws do not require lenders to pay interest on these accounts.

What Happens If I Sell My Home Or Refinance?

When you sell or refinance your home, your escrow account will be credited at closing. The amount may be used to lower your out-of-pocket costs or may be turned over to you as a direct payment.

What Happens If There Is Not Enough/Too Much Money In Escrow?

If your lender has underestimated your escrow payments, they may request you send an additional payment to make up the difference. In the event you are paying too much into escrow, your lender has the discretion to release the overage amount directly to you.

In most cases, shortfalls or overages of $50 or less are typically not a major concern.

If your lender requires you to have an escrow account for the taxes and insurance portion of your mortgage payment, it can be very helpful. Escrow accounts help ensure you do not have to come up with a large payment once a year for insurance or quarterly for taxes.

In some cases, if a lender does not require an escrow account, as a borrower, you may request they escrow your taxes and insurance for convenience.

Posted by

David Kosmecki

Area Sales Manager NMLS 265365 | 76988

Direct: (763) 519-1100 | Toll Free: (800) 536-0233

   

Check me out at: Fast Closing Now.

 

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Tags:
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Rainmaker
423,881
Jean Hanley
Coldwell Banker Kivett Teeters - Hemet, CA
Specializing in Folks Who Want To Buy/Sell Homes

David, this post comes just as I got off the phone with one of my buyers from a few months ago.  She was so excited because she received a small check from the lender that represented an overage on her impound (escrow) account.  So, off to buy new shoes she went!  I explained the whole thing to her and she just thinks I am a genius!  lol

Jan 10, 2014 07:43 AM #1
Rainmaker
406,493
Marnie Matarese
DWELL REAL ESTATE - Sarasota, FL
Showing you the best of Sarasota!

Like Jean, your post has just made me look brilliant with one of my buyers.  Thanks for the timely post.

Jan 10, 2014 07:44 AM #2
Rainmaker
247,909
David Kosmecki
Bay Equity - Osseo, MN

Thanks for your kind words & for

Commenting on my Blog!

Feb 18, 2015 06:01 AM #4
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Rainmaker
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David Kosmecki

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