| As a first time home buyer, it will not be long into your | | | | covered in the event of a disaster and feel confident |
| home buying adventure before you are presented with | | | | you are meeting your lenders requirements. |
| the concept of escrow. Here is a quick introduction to | | | | Confirm that your Payments were Made |
| escrow in the context of home insurance and property | | | | It is a good idea to confirm that your escrow items are |
| taxes. | | | | paid on time and no late charges have been applied to |
| Escrow Account - A Definition | | | | your account. Lenders are required to make your |
| "A trust account held in the borrower's name to pay | | | | payments in a timely manner as long as your |
| obligations such as property taxes and insurance | | | | mortgage payment to them is not more than 30 days |
| premiums." | | | | overdue. If you lender was late on the payments and |
| Escrow - How it Works | | | | you receive a bill for late fees or penalties, forward this |
| An escrow account is opened and maintained by your | | | | bill directly to your lender. As a matter-of-fact, if you |
| mortgage lender. It is essentially a savings account in | | | | receive any insurance or tax bills that are to be paid |
| which deposits are automatically made with money | | | | via your escrow account, also forward these to your |
| from your monthly mortgage payment. Your property | | | | lender. |
| tax bills and insurance premiums are paid by the lender | | | | Changes to Taxes or Insurance Costs |
| from the funds from the escrow account. | | | | Each year your lender will review your escrow |
| Why Does the Lender want to take on this Task? | | | | account. You will receive a detailed statement including |
| Your lender wants to make absolute sure that your | | | | the total deposits made into the escrow account and |
| home insurance premiums and property tax bills get | | | | the insurance and tax payments made on your behalf. |
| paid. Your home is collateral for all of the money they | | | | Your lender will notify you of any excesses or |
| lent you to purchase your home. If, for example your | | | | shortages in your escrow account due to changes to |
| home is destroyed by fire and you are not covered by | | | | your taxes or insurance costs. Typically, shortage |
| home insurance, that collateral is gone. Similarly, if you | | | | amounts will be added to your next mortgage |
| don't pay your property taxes and the state | | | | payment. By law, any excess of $50 or greater will be |
| forecloses on your property, the bank again loses its | | | | returned to you. |
| collateral. This is a risk most lenders are not willing to | | | | Open up (and read) that Homeowners Policy |
| take. An escrow account assures the mortgage | | | | You will continue to receive an annual copy of your |
| lender that your taxes and insurance are paid. | | | | homeowners insurance policy. Because you won't be |
| Advantages for You | | | | paying the bill yourself, you may get in the habit of |
| Budgeting for property taxes and homeowners | | | | simply filing the policy away without looking at it. This is |
| insurance could not be easier - as it is done for you. | | | | a mistake! To confirm that your home is not over |
| Additionally, you can be sure that your home is | | | | insured or under insured read your policy carefully. |