Understanding Escrow Accounts
What are escrow accounts and why are they beneficial?
When a person purchases a home they have the choice on behalf of the lender to have an escrow account setup to collect the taxes and insurance that are paid yearly on the property. This can be a wise move if you are one of those people who get really busy and forget to make payments to creditors. FHA, VA and conventional lenders may require the home buyer to have an escrow account if they place less than 20% down. Otherwise, you have the choice to have an escrow account, or not.
1. How is an escrow account managed? The amount in the escrow account varies during the year as deposits are added to the account when the home owner make their mortgage payment, tax payment and insurance payment on a monthly basis. The lender then makes the payments thru the escrow account on your behalf during the year as needed.
2. Can you Avoid Escrow? Yes, you are not required to have an escrow account if you put more than 20% down.
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