What Is Escrow and Escrow Analysis?
When working to secure a mortgage, you’ll likely hear the terms “escrow” and “escrow analysis.” Depending on your mortgage, you may have to create an escrow account and fund it with your monthly payment to ensure your property taxes are paid and insurance is maintained. Each year, your escrow will need to be monitored through an escrow analysis to determine its accuracy.
Here is what you need to know about your escrow and escrow analysis.
What Is an Escrow Account?
An escrow account is essentially a savings account for insurance and taxes. It’s a financial account held by a third party, usually your mortgage provider. The purpose of an escrow account is to pay for obligations of a purchase agreement. Your account balance is determined by property taxes and various insurance policies which are divided into a monthly amount that will go directly to your escrow.
What Is an Escrow Analysis?
Insurance and tax rates never stay the same. To ensure your escrow amount is correct, a mortgage lender conducts an annual escrow analysis. This analysis looks at payments made to the account and determines if there is a surplus or a shortage.
If you have a surplus in your account, the money will be returned to you. If there’s a shortage, however, you’ll have to make up the difference either in a one-time payment or via higher payments over time.
Your lender will also look to see if your monthly escrow payment needs to be adjusted.
How an Escrow Account Benefits You
An escrow account and analysis equally divide your property taxes and insurance, so you aren’t paying a huge bill each year. Escrow ensures your payments are on time, and a yearly analysis makes sure you’re only paying exactly what you owe.
Ultimately, an escrow account takes the pressure of paying insurance fees and property taxes off your mind, so you can enjoy being a homeowner.
Work with the Professionals at Butler Mortgage
If you’re looking to secure a mortgage in Central Florida, consider financing with Butler Mortgage. We’ve worked with both first-time and seasoned buyers looking for their dream home for more than 25 years. Let us help you find the right loan solution for you by calling 407-931-3800 or by filling out our free consultation form online.