Setting up a mortgage escrow account can streamline the payment of property taxes and homeowners insurance by spreading the cost over monthly payments. Here’s how to set up a mortgage escrow account:
1. Contact your lender
The first step in setting up a mortgage escrow account is to contact your lender. They will provide you with the necessary forms and information to establish the account.
2. Complete the necessary paperwork
Fill out the required paperwork provided by your lender. This typically includes an escrow agreement and authorization forms.
3. Fund the account
You will need to deposit funds into the escrow account to cover the cost of property taxes and homeowners insurance. This initial deposit is typically around two months’ worth of payments.
4. Understand how payments are calculated
Your lender will calculate the monthly escrow payment based on the estimated annual costs of property taxes and homeowners insurance. This amount may change each year based on adjustments to these costs.
5. Monitor your account
Keep track of your escrow account balance and payments to ensure they are accurate and up to date.
6. Familiarize yourself with escrow analysis
Your lender will conduct an annual escrow analysis to determine if there are any shortages or surpluses in your account. This may result in adjustments to your monthly payments.
7. Review your escrow statements
Regularly review your escrow statements to ensure all payments are being made on time and in the correct amounts.
8. Update your account as needed
If there are any changes to your property taxes or homeowners insurance, be sure to update your escrow account with your lender to reflect these adjustments.
9. Understand the benefits of an escrow account
An escrow account can help you budget for large annual expenses like property taxes and homeowners insurance by spreading the cost over monthly payments.
10. Know your rights as a homeowner
As a homeowner, you have the right to manage your own property taxes and homeowners insurance if you prefer not to use an escrow account. However, this means you will be responsible for making these payments on your own.
11. Keep your contact information up to date
Make sure your lender has your current contact information on file to ensure you receive important communications regarding your escrow account.
12. Seek assistance if needed
If you have any questions or concerns about your escrow account, don’t hesitate to reach out to your lender for clarification and assistance.