If you’re a first-time homebuyer, the process of buying a house can be overwhelming. However, you can minimize anxiety, especially in the home loan process, by understanding a few key terms and concepts prior to signing on the dotted line. One important term you will soon hear is “escrow account”, and our team at GVC Mortgage want to make sure you understand it.
What Is an Escrow Account?
An escrow account is an account that’s set up by the lender to collect funds for paying your annual property taxes and/or homeowner’s insurance premiums. Other items like mortgage and flood insurance may also be included.
Why Is an Escrow Account Necessary?
Many lenders require an escrow account to guarantee that your taxes and insurance payments are always made on time, and that your insurance coverage is adequate. Escrow accounts also enable mortgage companies to offer you competitive rates, as the possibility of your home’s taxes or insurance becoming delinquent is reduced. Another advantage is that you won’t have to pay these bills yourself; your mortgage company will submit the payments for you.
What Bills Are Typically Covered?
Typically, the funds in an escrow account cover the following:
- Property taxes
- Homeowners/hazard insurance premiums
- Mortgage insurance premiums, if required
- Flood insurance premiums, if required
- Condo unit owner’s insurance, if required
An escrow account does not pay:
- Interim tax bills, supplemental tax assessments, or any other fees that are not included in your property tax bill
- Homeowner’s Association (HOA) fees
- Premiums for coverage such as personal property insurance
- Utility bills
Want to learn more about escrow accounts or any other mortgage terms before you start the loan process? Schedule some time with one of our home loan professionals at GVC Mortgage of Carmel, IN. We’ll gladly walk you through the home loan process and help you determine what type of mortgage might be best for you. To schedule a free consultation, contact GVC Mortgage today at (317) 564-4906.