It’s a question we often get asked—what is an escrow account? Plus, how does it apply to the home buying process? Here’s a quick overview:
What Is an Escrow Account?
According to the Consumer Financial Protection Bureau, an Escrow Account, also known as an impound account, is an account set up by the mortgage lender for the borrower so the borrower will pay certain property-related expenses, such as home insurance or taxes, in a timely manner (“What is an escrow or impound account?,” 2017).
How Does It Work
You, as the borrower, set aside money every month in your Escrow Account. This monthly amount set aside is included in your mortgage payment to pay expenses through the servicer. You will pay home insurance and property taxes a little every month versus a large amount once or twice a year. As stated by the Consumer Financial Protection Bureau, an Escrow Account can be required by some lenders to make sure bills get paid by the borrower, and other times it can be required by law (“What is an escrow or impound account?,” 2017).
Overall, Escrow Accounts are a sure way to make sure your home expenses are paid, and it can be more manageable having it built into your monthly mortgage payment. And don’t worry if your taxes or insurance premiums change each year, your monthly payment will adjust accordingly.
Want To Learn More?
Our Mortgage Loan Originators are happy to answer any questions you may have about Escrow Accounts and the mortgage loan process. Contact us today to get started!
Consumer Financial Protection Bureau. (2017, August 3). What is an escrow or impound account? Consumer Financial Protection Bureau. Retrieved October 27, 2021, from https://www.consumerfinance.gov/ask-cfpb/what-is-an-escrow-or-impound-account-en-140/.