What is a Mortgage Home Loan Escrow?

So what is Escrow, how does it work, should you escrow or not? Let’s dive right in! Escrow on a mortgage loan applies to either a new purchase or an existing home generally a refinance or cash-out. The actual “escrow” refers to the Property Taxes and Hazard Insurance amounts included in your mortgage payment paid to the bank each month. This amount is collected each month and paid out when the bill comes due on an annual basis. This is an important topic as some like the bank to collect the money each month not having to worry about paying the home obligations each year and some want to control those funds.

*Texas Premier Mortgage will give you the option to include or exclude your Escrow Account with as little as 3% down on a Conventional loan. Most lenders require 20% down payment to give you the option. This is another benefit of using a Mortgage Broker we combine: Knowledge, Speed, Technology, and Better Customer Service to name a few.

How is an Escrow Account Determined?

The escrow account is determined by adding all Property Taxes for the year + Hazard Insurance for the year divided by 12 months. This amount will determine the monthly amount you will pay the bank each month or the amount you will need to put away in your savings each month if you choose to waive the escrow.

Do you qualify for an Escrow Waiver Option?

FHA / VA / USDA Loans – its mandatory you include taxes and insurance each month

Conventional – At Texas Premier Mortgage you can waive escrow putting as little as 3% down this is a huge benefit to give you the power to decide what’s best for you. Most lenders across the country will require a 20% down payment for you to qualify.

Jumbo – will vary on the down payment amount and each lender will have different requirement

Benefits of Escrowing:

1. It’s built into your monthly payment

2. The bank will collect the bills and pay them for you

3. You don’t have to pay a big bill at the end of the year

4. 1 less bill to keep track of and pay each month

 Why You Shouldn’t Escrow: 

1. You don’t control the money

2. Your monthly payment is higher when you include Taxes and Insurance in the monthly payment

3. Each year the bank will determine if your Taxes or Insurance amounts went up resulting in your monthly payment to increase

4. Some lenders underestimate your upfront escrow amount when you initially buy the home causing an escrow shortage when the bank reviews your account annually, this can cause extreme increases in your payment to correct or you will have the option to pay the bank a lump sum to correct

5. Headaches with customer service to try and correct

6. #1 Compliant on a loan after closing is the incorrect escrow amount affecting the monthly payment

7. Save up to thousands of dollars at closing by eliminating the initial escrow deposit

8. With Texas Premier Mortage: No escrow waiver fee, which is typically 0.25% of the loan amount

9. On a Refinance it add extra closing costs raising the loan balance

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