Escrow Accounts Are Sometimes Mandatory
As a mortgage borrower, it’s often your choice whether to escrow the taxes and insurance on your mortgage. Sometimes, however, to escrow is mandatory. As one prominent example, all loans insured by the Federal Housing Administration (FHA) must include an escrow account. If you plan to use a low-downpayment FHA loan, then, you should plan to do an escrow as well.
USDA and VA loans also require an escrow. For conventional loans, the escrow option works differently. It is optional, but only if your loan-to-value is 80% or less. Even then, you may want to escrow your taxes and insurance anyway. This is because borrowers who choose to waive escrows are often charged a small fee, or are shown a slightly higher mortgage rate, to compensate the lender for its additional risk.
A tax lien from not paying your real estate tax bill is one of the few lien type that will supersede your mortgage lien. If your taxes go unpaid, your lender could lose its money.
-
Add a note