An escrow reserve account is used to collect and “reserve” the real estate taxes and home owners insurance portion of your monthly mortgage payment for when your taxes and insurance bills are due. In Washington state, property taxes are paid twice a year and home owners insurance is paid annually.
If you have enough equity (80% loan to value or lower), a lender may permit a home owner to pay taxes and insurance are their own and not have them included in their monthly mortgage payment. Lenders typically charge 0.25% in fee if a home owner elects to do this. On a $400,000 loan amount, this is a cost of $1000. This fee is often priced into the cost of the rate. It’s not unusual for a home owner to be unaware they paid this fee since it is most often already factored into the cost of the interest rate.
However there is a compromise of sorts. Did you know that many lenders will permit a home owner to pay their home owners insurance and not charge a 0.25% escrow waiver fee? This is possible when property taxes are still included in the monthly mortgage payment and the property has an 80% loan to value or lower.
If you are considering buying or refinancing your home located anywhere in Washington, I’m happy to help you.
Im thinking of buying a home for 160,000.00 with 20% down 32,000.00 with a loan balance of 128,000.00 on a 15 yr note. My question is i would like to pay my properity taxes and homeowner insurance which comes out to be around 3600.00 a year. My 1st ouestion is can I do this? My 2nd question is do I pay this amount up front? My 3rd question is What would be my closing cost? The reason I ask this for is for budging. Based on what I looked at my down payment and closing cost would be around 36,000.00. With my credit which is excellent my payment would be around 850.00 to 900.00 a month. And I would pay my taxes and insurance 2 times a year is this correct?.
Hello Samuel,
You should be able to pay your property taxes and homeowners insurance separately (not included in your mortgage payment) when you’re putting 20% or more for down payment.
The annual premium for the home owners insurance will be due upfront at closing – typically the escrow company takes care of this payment.
The property taxes will be based on when the next payment is due to the county. In Washington state, they’re due twice a year (April and October).
As far as closing cost, please contact a local licensed Loan Officer to get a detailed scenario including the closing cost.
Good luck!