Escrow & Insurance Accounts

Escrow Accounts, PMI and Title Insurance how does this affect me in purchasing my house? These are all tools to insure proper protection is in place in regards to your new purchase.

Escrow accounts

Are established by the borrower when first obtaining a new mortgage loan. Each month, when a borrower makes a mortgage payment, it includes mortgage interest, mortgage principal and two other items: Property taxes and hazard insurance. For states where taxes are paid annually, each mortgage payment will include 1/12th of the owner's annual tax assessment. Most lenders require 2 months worth.

What does it take to establish an escrow account?

Federal rules allow no more than two months' plus $50 at loan closing for a new purchase. This money which is kept in the account in addition to the monthly payments made by borrowers is used to establish the account and is there in case there is a shortage at years' end

Where does the lender get the tax information in the first place?

Local guidelines vary, but typically it comes from the title company, which obtains the tax data from the various assessing agencies.

Are escrow accounts a good thing?

If you the borrower feels comfortable paying taxes on your own, and if the loan does not require the establishment of an escrow account, than the same funds that would normally be placed in escrow could be gathering interest elsewhere. If you like the security of knowing that your taxes and insurance will be paid on time, then an escrow account may be for you.

You won't have to worry about writing those big checks when taxes and insurance bills come due.

Mortgage Insurance

Most first time home buyers, saving enough money for a seizable down payment is the greatest barrier to home ownership. Traditionally, lenders have required a down payment of at least 20 percent of the home's purchase price. However, lenders will approve a mortgage with a smaller down payment if the mortgage is covered by private mortgage insurance.

Lenders generally require mortgage insurance on low down payment loans because experience and studies show that a borrower with less than 20 percent invested in a house is more likely to default on a mortgage. In effect, the mortgage insurance company shares the risk of foreclosure with the lender.

What is Private Mortgage Insurance?
Private mortgage insurance is insurance that protects a lender in the event that a homeowner defaults on a loan.

Can I cancel PMI?
Yes, once 20% of the appraised value is met.

PMI Payment Options
PMI give you several options, most people choose to add it to their monthly mortgage payment through their escrow account. Additionally it can be paid at closing as an annual payment.

Does PMI Differs from FHA Insurance?
FHA MIP is similar but there is a difference if you compare the loan products.

Title Insurance

Buying any kind of real estate could very well represent the largest single investment a person ever makes. Real estate, like every other thing of value, is worth protecting.

A policy of Title Insurance is a contract of indemnity between the insured and the insuring company relating to the title to the land described in the policy, protecting the insured against loss of damage by reason of defects, liens or encumbrances of the insured title existing at the date of the Policy and not expressly excepted from its coverage.

The Policy is issued after a complete search and examination of the public records that shows the condition of the record title, including any money obligations outstanding against the property, easements and other matters which may affect the rights of ownership, possession and use of the property.