The most common reason for an escort account to be required is when you buy a home.The money you deposit into the account is used to pay your homeowner's insurance premiums and state property taxes.An escrow account has three parties: the depositor, the lender, and the beneficiary, in this case the state and your insurance company.
Step 1: Find out if your lender has an account.
If your lender doesn't require you to set up an account, you may want to ask if you can have one anyway.It is possible to pay a little each month toward your property tax and homeowner's insurance premiums, which are normally paid in large lump sums each year.Monthly payments can make it easier to budget.If you don't have an account, you'll have to put money back into it.If you have a VA or FHA loan, or a conventional mortgage in which you've borrowed more than 80 percent of the property's value, you must have an escort account.
Step 2: Information should be gathered.
Your lender may want to know about your homeowner's insurance and property tax.If your lender doesn't have the correct information, you may get a bill stating that they have not paid your taxes or premiums on your behalf.It can be difficult to get your money out of the account.Your lender will calculate the amount of money you need to deposit into the escrow account each month based on the information you give.The total annual payments owed for tax and insurance should be used to calculate your own payments, and you should double-check the calculations made by your lender.You have to divide the premium by the number of years of coverage to get the annual cost of the policy.
Step 3: The appropriate parties should be notified.
If your mortgage lender is paying your homeowner's insurance premiums and your property tax for you, make sure the bills are sent to the right place.Even if your lender is paying the bills, they are your responsibility.You have to make sure that the correct amount is being paid.
Step 4: The minimum balance needs to be determined.
Your lender and the bank will usually require the account to be established with a minimum balance which is maintained at all times.The amount of money your lender can require you to keep is limited by federal law.The minimum balance is usually equal to two monthly payments.Any increase in taxes or premiums is covered by the reserve.
Step 5: Make monthly deposits.
The total of your state property taxes and homeowner's insurance premiums will be less than the monthly deposit.You can make a single monthly payment to your mortgage lender.Part of the payment will go towards your mortgage principal and interest, while the rest goes into your escrow account to cover your property taxes and insurance premiums.If you don't keep up with your deposits, you could face penalties from your lender and eventually face foreclosure.The state could place a tax lien on your home if you don't pay your property taxes.If your homeowner's insurance isn't paid, this could lead to foreclosure if your mortgage lender requires you to maintain insurance coverage.The lender can add premiums to your loan balance.These insurance policies tend to cost more and offer less benefits than if you paid for it yourself.
Step 6: You should check your account regularly.
Monitoring the balance and deposits will keep you up to date on the status of your account.Between annual statements you can go online to check the transactions posted to your account.
Step 7: Your annual account statement can be received.
Federal law requires your lender to send an annual statement of the transactions posted to your account.The statement usually includes a list of all deposits and payments made out of the account, as well as an analysis of expected activity for the next year.Make sure your statement is in agreement by comparing it to your initial statement or previous statement.
Step 8: Take a look at the totals from the state and your insurance company.
If you've received statements for property taxes or insurance premiums, make sure they match the amounts listed on your account statement.If the lender has noted a change in the due date, make sure to check your taxes and premiums.The amount of your monthly deposit can be affected by the due date for these expenses.If you haven't had any claims, you should contact your insurance company to find out why your premiums have gone up.It's possible to switch to a different insurance company to save money.If your property taxes have gone up, you should contact your local taxing authority and make sure the assessment is correct.
Step 9: Take care of any shortages.
If you don't have enough money in your account to pay your taxes and insurance premiums, you can either make a lump-sum deposit or pay a larger monthly escrow payment.Your payments may go up to account for increases in property tax or premium rates.If you make a deposit to cover the shortage in full, you will still be responsible for a higher payment each month to account for the changes.