Though escrow accounts are common, you may find yourself asking a lot of questions about them. We already explained some of the escrow basics, but to help gain a better understanding of what to expect, here are some common questions, answered.
Escrow (also known as an impound account) acts like a savings account managed by your mortgage provider. Your escrow account is separate from your mortgage, but every time you make a mortgage payment a chunk of it is put into escrow and used to make payments on your real estate taxes and insurance premiums.
Your escrow account allocates your costs throughout the year in monthly payments. So instead of coming up with large sums once or twice a year or keeping track of all your home-related payments, your mortgage servicer does it for you with the money in your escrow account.
Plus, you don’t have to worry about missed or late payments, because your lender takes care of making these payments by their due dates. One less thing to worry about!
Are We the Right Match for Your Home Purchase?
Your escrow account is calculated by adding up your property and school taxes, with your homeowners insurance for the year, and then divided by 12. That number is then added to your monthly mortgage payment.
Keep in mind, you’ll need to have the money at closing to fund the escrow. This total could vary, depending on the month you close and when your taxes are due.
An escrow cushion are funds that a servicer may require you to keep in your escrow account to cover disbursements that are either unanticipated or made before your payments are available. Federal law caps this cushion at 1/6 of your total escrow charges.
An escrow analysis is an annual review of the amount of funds held in your escrow account to ensure the correct amount is being withdrawn. This analysis also determines if the borrower needs to pay money to make up a shortage or if the lender has collected too much money, which entitles the borrower to a refund. This analysis is required under the Real Estate Settlement Procedures Act (RESPA).
The most common reason for an increase in your payment is due to the increase of property and/or school taxes. As taxes go up, your escrow payment will go up. Homeowner’s insurance fees can rise as well, but typically the increase is minimal. Keep in mind, your escrow payment can decrease as well. This usually is because your property value went down, resulting in a lower tax assessment and lower escrow payment.
You can consult your local tax authorities to review your taxable amount and discuss any inconsistencies or if you for exemptions.
Have additional questions about escrow accounts? A Newrez Loan Advisor can provide you with more information. Get in touch with us today!
Try our suite of calculators and tools to get a better understanding of how your finances impact your options.
We’ve assembled a treasure trove of jargon-free information to demystify home-financing and arm you with valuable insights and actionable options.
Buying & Selling Detailed information about purchasing a new home and selling your current one. Refinance Leveraging your home value to rework your mortgage terms for a lower rate. Home Ownership Making the most out of being a homeowner with end-to-end tips and information.Community Investment At Newrez we recognize that home financing and loan servicing are part of something much larger. Recognizing that we are in the business of building and supporting communities, Newrez is proud to offer time, money, and expertise to our many Community Investment Initiatives.
Newrez believes the lending business shouldn't just be about home loans - it should be about homeowners. That's why our employees get to know our customer's real needs, through final closing, and beyond.
Industry leading loan options Simple pre-qualifications and application processes Loans for everyone, from seasoned investors to first-time buyers Putting power back into underserved communitiesDoing business as Newrez Mortgage LLC in the state of Texas. Alaska Mortgage Lender License #AK3013. Arizona Mortgage Banker License #919777. Licensed by the Department of Financial Protection & Innovation under the California Residential Mortgage Lending Act. Loans made or arranged pursuant to a California Finance Lenders Law license. Massachusetts Lender #ML-3013. Licensed by the N.J. Department of Banking and Insurance. Licensed Mortgage Banker-NYS Department of Financial Services. This site is not authorized by the New York State Department of Financial Services. No mortgage loan applications for properties located in the state of New York will be accepted through this site. For licensing information, go to: www.nmlsconsumeraccess.org.
Military-Friendly® is a registered trademark of VIQTORY and is not affiliated with Newrez LLC.
*Closing cost offer available to customers who submit an application for a purchase. Only available for single family primary residences. Credit provided at closing. The offer is nontransferable and can only be used by the intended recipient. Advertised discount can only be applied toward payment of closing costs up to a total amount of $1,000 subject to product underwriting guidelines. Any portion of the discount amount not used toward closing costs will be waived.
**A pre-approval does not signify that all underwriting requirements have been met. Actual terms, including interest rate, are subject to change without prior notice and may vary based on eligibility criteria. All products are subject to credit and property approval. Not all products are available in all states or for all dollar amounts. Please contact Newrez for additional details.
***Lock & Shop Program is for borrowers with a PowerBuyer Certification**. The lock will be honored for 75 days total. Consumers must initiate a mortgage loan application for a specific property and be under purchase contract for the property at least 45 days prior to lock expiration to extend the locked rate. All rate lock extensions are subject to Newrez’s standard rate lock extension fees. Not available for all loan products. Please contact NewRez for additional details.
****Newrez agrees to pay the borrower the amount of the earnest money deposit (up to $5,000) following the home loan closing, if the loan does not close on or before the contract closing date due to a delay caused by Newrez. Void if there are any material changes to income or assets. Offer requires 30 business days from Newrez’s receipt of purchase contract to closing date. Other requirements include: minimum 700 credit score, owner occupied purchase transaction. LTV and property type restrictions may apply. Available only through the Newrez Direct to Consumer Channel. Payment may be subject to reporting for tax purposes. Please contact Newrez for additional details.
†By refinancing an existing loan, the total finance charges may be higher over the life of the loan.
††The rate on your existing mortgage will not change. The Newrez Home Equity Loan program requires borrower to obtain a second mortgage at current market rates. Loan amount based on underwriting guidelines. Minimum 660 credit score. Minimum and maximum loan amounts apply. Program financing only available on properties with one existing mortgage lien and subject to maximum loan-to-value ratio. Not available in all states or territories. Other terms and restrictions apply. Please contact us for more information.
