What is an Escrow Account? Find out

Mortgage and Lending with www.DaveYourMortgageGuy.com - Legend Lending NMLS #293883


Many times during the home buying process certain words or topics will come up that you are not familiar with.  One of most common topics I see come up is an Escrow Account.  The short definition is that your Escrow Account is an account your mortgage company has to hold your taxes and insurance in.  If you are “Escrowing” then in each of your mortgage payments will be 1/12th of your yearly real estate taxes and home insurance bills.  So that when those bills come due, the mortgage pays them. 


With an escrow account can come other questions, so I wanted to go over the random questions and topics that I have seen come up when someone has an escrow account:


  1. Do I have to have an escrow account?- The long answer to this is , on a FHA, VA or USDA loan you must have an escrow account.  If you do a conventional loan you can choose to waive your escrow account usually for a fee, if you are putting down a down payment of 20% or more.  Or if you decide to do two mortgages, such as an 80/15, 80/10, etc.

  2. Why am I paying 1yr of insurance at closing?- Home insurance is paid ahead so the 1yr you are paying at closing is for the coming 12mths, then in a year when the following 12mths comes up that insurance bill is paid out of your escrow account.

  3. Why am I getting a Tax or Insurance Bill? -Even thou your taxes and insurance are paid out of your escrow account, you will still get copies of the bills.  The bills will also be sent to your mortgage company, but to be safe you will also want to send them the copies you receive.  Or at least confirm that the mortgage company received their copies.

  4. Why are they collecting an extra 2mths of insurance and taxes at closing? -At your closing the mortgage company will usually collect an extra 2+mths of taxes and insurance.  This is considered a buffer so if you were to skip a payment, there would still be some extra money to pay the bills.

  5. Can I change my insurance company while I have an escrow account?-  Yes, you can change insurance companies at anytime and your insurance company will help you with making that change.

  6. What if my taxes go down? – If your taxes or insurance go up or down your mortgage lender will update the escrow account and correct your payment once they pay the bills.

  7. When do I get the extra money in my escrow account?- If you sell your home,  pay off your mortgage or refinance your mortgage, your mortgage lender will refund you the money left over in your escrow account usually 30 days after closing. 


Having an Escrow Account can cause you to have many questions.  I hope this article was able to answer many of those for you!


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David Krichmar 

Mortgage Banker NMLS#293883 

Legend Home Lending

LLC NMLS #229421

Has Written For Realtor Magazine, Houston Agent Magazine, Scotsman Mortgage Guide

Appeared On Fox Business


Named 5 Star Mortgage Professional 2013, 2014, 2015, 2016, 2017

Named Top Mortgage Professional 2010,2011




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If you are looking for a FHA, VA, USDA, Homepath, Conventional, Jumbo, Construction, FHA 203k mortgage in Fort Bend County, Sugar Land, Houston, Katy, Harris County, Brazoria County, Pearland, Richmond, Bellaire, West University, The Woodlands, Kingwood, Friendswood, Clear Lake, Galveston, Fulshear, Tomball, Spring, Conroe, Montgomery County or anywhere in Texas I am your GUY!  


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Troy Erickson AZ Realtor (602) 295-6807
Good Company Real Estate www.ChandlerRealEstate.weebly.com - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

David, great Q&A regarding escrow accounts. Many people do not understand what these are, especially first time home buyers.

Jan 05, 2015 03:06 AM #1
David Krichmar
www.DaveYourMortgageGuy.com - Legend Lending - Sugar Land, TX

thanks Troy!

Jan 05, 2015 03:11 AM #2
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Great info and explanations here to questions heard often, David Krichmar.  Escrows seem to be a topic that confuse and mystify many.  Your info will definitely help ...


Jan 05, 2015 05:28 AM #3
David Krichmar
www.DaveYourMortgageGuy.com - Legend Lending - Sugar Land, TX

thanks Gene Mundt!

Jan 05, 2015 05:45 AM #4
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