Mortgage Escrows. Facts and Tips.
Mortgage Escrow Waivers, Mortgage Escrows Payment Calculator. Current for 2012.
Per HUD, all lenders follow these guidelines.
ESCROW CALCULATOR - Determine your initial escrow deposit amount per RESPA, and your monthly escrow payment.
If you are purchasing a home in Pennsylvania, you should always plan on needing 13 months taxes and insurance at closing. This is because in addition to the initial escrow deposit required, there is per diem due back to the seller. That is contained in the sales contract. 13 months is always needed between the two, regardless of any specifics.
CAN I WAIVE ESCROWS?:
If your LTV is 90% or below, you can waive escrows for a one time fee at closing of .25% of the loan amount. ($250 fee at closing for every $100,000 borrowed). For larger loans especially, purchasing an escrow waiver really does not make good financial sense (costs $1,000 for a $400,000 loan).
If a loan officer offers to pay the waiver fee for you, or not charge the fee, you can be sure they are passing it on some other way. "There is no way to truly waive the escrow waiver fee". Fannie Mae and Freddie Mac require it.
Any taxes or insurance due within 60 days of closing must always be paid at closing, whether you escrow or not.
WHY DO I HAVE TO PAY A FEE TO KEEP MY OWN MONEY?
A very common question! It is NOT because the lender wants to make money in interest on your money. It is because they are protecting their collateral/investment in your house. If a homeowner does not pay their taxes, the city/county will take the home and sell it and the lender gets 2nd place behind the tax collector, so they are not assured of getting paid.
If a person does not pay their homeowners insurance and the house is destroyed by fire, etc, the lender gets nothing.
They want to make sure these important things are paid to date. BONUS: It is very common for the lender to give you interest free loans on shortgages in your escrow. They must allow you a year to pay it back, interest free, when the taxes or insurance bills increase and there is not enough in your account.
All these things benefit the homeowner! We notice also the problems of past are eliminated now as tax and insurance companies bill lenders electronically.