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Old 08-20-2008, 06:50 PM
 
Location: Pennsylvania, USA
5,217 posts, read 4,111,845 times
Reputation: 908

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Quote:
Originally Posted by marykate1 View Post
Hi,


I was wondering if I should open an escrow account where they charge me prepaid costs of almost $3,500? Or is it recommendable to pay for your own taxes and insurance?

I wuold opt for having hte escrow. It's another bill you don't have to worry about [paying because it becomes the mortgage companies responsibility to pay it from your escrow (here it's twice a year) and your homeowners. BTW.. they do give you any overages and you get to keep the interest that the escrow acrues. Usually they will do an escrow analysis once a year and give you any overage / interest that you have in it.

It's convenient and you always know that your taxes are covered. some mortgage companies actually require you to haev an escrow account anyway.
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Old 08-20-2008, 07:47 PM
 
Location: Right where I want to be.
4,507 posts, read 7,824,676 times
Reputation: 3304
Quote:
Originally Posted by TristansMommy View Post
I wuold opt for having hte escrow. It's another bill you don't have to worry about [paying because it becomes the mortgage companies responsibility to pay it from your escrow (here it's twice a year) and your homeowners. BTW.. they do give you any overages and you get to keep the interest that the escrow acrues. Usually they will do an escrow analysis once a year and give you any overage / interest that you have in it.

It's convenient and you always know that your taxes are covered. some mortgage companies actually require you to haev an escrow account anyway.
I wouldn't take such an easy going approach to an escrow account. You DO have to worry about it because at the end of the day YOU are the one responsible for paying the taxes and insurance. When the taxes were paid on the wrong property from our escrow account the city/county tax office didn't really care that it was a mistake with the escrow account....they sent us the late notices and we had to pay the fines and taxes or they would take action against us....they don't deal with your escrow account.

If the mortgage company misses paying your homeowners insurance the insurance company can and will CANCEL your policy....no matter if the mortgage company was supposed to do it.

Yes, you might get some overages back but if your escrow account comes up short for some reason YOU will have to come up with a lump sum (sometimes spread over a few months) to make up for the shortages.

Escrows are not 'set it and forget it' accounts and you should always pay attention to your tax and insurance to be sure all is well. Yes, you can often recover any real damages from your mortgage company but that is a real hassle even after the mess with taxes and insurance has been corrected and as other posters have mentioned, if you can save up the money yourself you can do without the escrow.
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Old 08-20-2008, 08:02 PM
 
Location: Jollyville, TX
3,704 posts, read 9,095,596 times
Reputation: 4068
It all boils down to..how comfortable are you being able to write the tax and insuance checks when they come due? Yeah, you can make a little interest on the money if you hold it yourself, but sometimes it's just a lot easier to have it done automatically. I'm currently in a loan without escrow and I like the freedom of being able to manage it myself, but it's also painful to remember that the money in savings isn't real -it's a liability that I will have to pay out at some point. I also did the bunching thing this year because I had a reduced tax liabilty for 2007, so it's nice to have that option but it's not for everyone.
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Old 08-20-2008, 08:44 PM
 
Location: Houston, TX
18 posts, read 61,348 times
Reputation: 14
Quote:
Originally Posted by TristansMommy View Post
... BTW.. they do give you any overages and you get to keep the interest that the escrow acrues. Usually they will do an escrow analysis once a year and give you any overage / interest that you have in it.

It's convenient and you always know that your taxes are covered. some mortgage companies actually require you to haev an escrow account anyway.
In addition to the points raised by NCyank, the bit about getting to keep the interest varies from state to state. The OP is in Texas, and in Texas the lender is not required to pay you interest. That's not to say you might not get lucky and find a lender that will, but I'd think it unlikely. Just one more reason why I have waived escrow.
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Old 08-20-2008, 11:12 PM
 
Location: Fort Myers, FL
1,286 posts, read 2,594,674 times
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based on the level of your knowledge and the questions you have been asking, i would definitely recommend that you escrow. they will require a full year of escrow plus the remaining months of the year. this allows them to have a cushion for the adjustments. every county/city has there own milleage and the escrow company cant guess what your taxes are going to be. most people don't have lump sums of cash sitting around or cant save it on their own.
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Old 08-21-2008, 07:31 AM
 
Location: Houston, TX
18 posts, read 61,348 times
Reputation: 14
Okay, my post above was my own experience, but based on the OP's posts and questions over the past few days, I would definitely recommend escrow for the OP. OP strikes me as a first-time buyer with very little knowledge of the process, and anything that will make it simpler is in order. But more than that, I would again urge OP to get some professional assistance!
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Old 08-21-2008, 09:00 AM
 
Location: Pennsylvania, USA
5,217 posts, read 4,111,845 times
Reputation: 908
Quote:
Originally Posted by brokerdave View Post
based on the level of your knowledge and the questions you have been asking, i would definitely recommend that you escrow. they will require a full year of escrow plus the remaining months of the year. this allows them to have a cushion for the adjustments. every county/city has there own milleage and the escrow company cant guess what your taxes are going to be. most people don't have lump sums of cash sitting around or cant save it on their own.

A full year is not always neccesary. In my case they wanted 2 months escrow. I think it depends on the municipality and mor importantly the mortgage company.

Taxes can also be estimated.. tax increases maybe not..but that is why they always take more than they need monthly for that cushion. My wscrow payment ws $600/month for insurance nad taxes and I would always have a little extra cushion in the account.
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Old 08-21-2008, 09:07 AM
 
Location: South Carolina
5,298 posts, read 5,673,057 times
Reputation: 8131
Our first home we didn't have an escrow account,this time we do and I prefer it that way.I pay my payment and they divy out my taxes and homeowners ins.Less for me to worry about.
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Old 08-21-2008, 10:04 AM
 
Location: Cary, NC
1,036 posts, read 3,627,489 times
Reputation: 503
Quote:
Originally Posted by TristansMommy View Post
A full year is not always neccesary. In my case they wanted 2 months escrow. I think it depends on the municipality and mor importantly the mortgage company.

Taxes can also be estimated.. tax increases maybe not..but that is why they always take more than they need monthly for that cushion. My wscrow payment ws $600/month for insurance nad taxes and I would always have a little extra cushion in the account.

Legally it should be 2-3 months as you say. There is a maximum limit that lenders can keep in their escrow account, and if it is over that they must send you a check. If its under the minimum, then they ask for a check.

If they are asking for a year that's way too much.... I think the poster was confused at that. At closing you do pay a year of insurance, but that is not for the escrow account. You are paying the year upfront for your coverage (doesn't make sense to pay insurance after the fact ).

Most lenders now won't give you an option, or if they do will charge a fee (or higher interest rate) to waive escrow. It adds to their risk if someone has control of their taxes/insurance and forgets to pay.
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Old 08-21-2008, 10:21 AM
 
1,811 posts, read 5,141,085 times
Reputation: 894
I am perfectly capable of managing my finances, however, I do not mind having an escrow account at all. I just make sure to check my account with the assessor twice a year to make sure the bill was in fact paid by the due date. I can also easily check with my mortgage company to see what was paid out of my escrow account.
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