Escrow Accounts

What’s an escrow account?

An account you fund each month as part of your total monthly payment. We use it to make property tax and insurance payments for you. Items like mortgage insurance and flood insurance may also get paid from the account.

Why am I required to have an escrow account?

Most of the time, escrow accounts are required if your down payment was less than 20%. There are benefits to having an escrow account, even if it isn’t required. It helps you manage large expenses like property taxes and insurance premiums so you don’t have to save for them separately. You make 1 combined mortgage and escrow payment each month and we deposit a portion into your escrow account. When your property tax and insurance bills are due, we pay them on your behalf.

What bills are paid from an escrow account?

The money in your escrow account pays:

  • Property taxes
  • Homeowners insurance
  • Mortgage insurance (if required)
  • Flood insurance (if required)

How is my escrow amount determined?

We:

  • Estimate how much your taxes and insurance will cost over the next 12 months. We base this on your loan closing documents, taxing authority, and insurance company.
  • Divide that by 12 and add it to your monthly mortgage payment.
  • Determine if your payment needs to be adjusted so your account stays balanced.

Why are you collecting funds when I paid my taxes and insurance premiums at closing?

The payments you made at closing were for your initial deposit or for bills that were due immediately. You’ll put funds into escrow each month for future property taxes and insurance premiums.

Do I need to send you my tax and insurance bills each time they’re due?

No. We usually get them from your local property tax office and insurance company. We’ll let you know if we need you to send the bills to us.

What’s an escrow review?

Each year, we review your account to make sure the escrow portion of your total monthly payment covers your property taxes and insurance premiums. Changes to your property taxes and insurance premiums may cause your monthly payment to change. We’ll send you an escrow statement after each review.

What’s a shortage?

If the funds in your escrow account are projected to be below your minimum balance at the lowest point in the 12-month period, you have a shortage. This can happen if the taxes or insurance premiums for the previous 12 months were more than expected. Or, if they’re estimated to go up in the next 12 months.

You can make up a shortage in 1 of 2 ways:

  • Pay it in full. Send a check for the full amount and we’ll put it in your escrow account
  • Pay it over 12 months. We’ll add a portion to your monthly payment.

What’s an overage?

If your escrow account is projected to have more than the minimum balance required at its lowest point in the 12-month period, you have an overage. This happens if the taxes or insurance premiums for the previous 12 months were less than expected. Or, if they’re estimated to go down in the next 12 months. In most cases, we’ll send you a refund check for that amount.