Photo by:  Tuğba Yüksel

Why is homeowner’s or hazard insurance included in monthly payment when paid first year on HUD-1 and GFE

Unless you are waiving escrows and requested that at the time of loan application (LTV less than 90% required and fee may be required) 1/12th of your future taxes and homeowner’s (also called hazard) insurance will be due each month as part of your mortgage payment.  In addition, the current year taxes and insurance must be paid in full at or before closing.

The monthly payments you are making will go into your escrow account to accumulate for the following year’s bills.  You will receive an Escrow Analysis at closing that will show exactly what your escrow account balance and disbursements are for the next 12 months.

Be assured a lender is not allowed to take any more than required to have a 2 month escrow cushion.  This cushion will cover the inevitable annual increases your taxing body and insurance company issue.

Here is a handy escrow calculator 

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