I bought a house, how does the escrow account work?
I bought a house, how does the escrow account work? When buying a house through a mortgage loan, at the closing of the sale the lender or Lender can choose to have all payments deposited in an escrow account, in English called an escrow account. The objective of this practice is to ensure that it is paid in a timely manner, not only to the bank but also to the tax authorities and insurance companies.
Thus, each month, the client will deposit a sufficient amount to pay the mortgage, insurance, and taxes in this kind of guarantee account. To find out how much to deposit, the Lender will add up the annual amount of home taxes, mortgage, and insurance – both homeowner and flood – and divide them by twelve months.
Why should I use an escrow account?
In general, an escrow account will be used when the buyer of the property, when obtaining a conventional loan, paid a downpayment of less than 20% of the value of the home. Loans guaranteed by the Federal Housing Administration, the famous FHAs, and veteran loans also require an escrow account.
In short, paying a monthly fee to a guarantee account is a convenient way to make the different disbursements that the house you just bought will generate. You only make one transaction and it is the bank that will be in charge of distributing all your payment obligations. In this way, you will never forget to pay your insurance company and your home will not be unprotected against the threat of a hurricane or flood. I bought a house, how does the escrow account work?
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