Escrow Account Explained: Property Taxes and Insurance in Your Monthly Payment
Most mortgages include an escrow account where a portion of your monthly payment is held to pay property taxes and homeowners insurance when they come due.
What You'll Learn
- What an escrow account is
- How escrow is calculated
- Escrow analysis and adjustment
- What happens if you have a surplus or shortage
- Waiving escrow (20%+ equity, varies by lender)
The Full Explanation
Escrow calculations are part of the PITIA payment that affects DTI and affordability. CTC Processing calculates accurate escrow amounts at intake to ensure payment estimates are correct throughout the file.
Frequently Asked Questions
How is my escrow payment calculated?
Annual property taxes + annual insurance premium, divided by 12. The lender may also require a 2-month cushion in the account at all times.
What happens if my escrow is short?
At annual escrow analysis, if your account is short (because taxes or insurance increased), the lender will either increase your monthly payment for the following year or ask for a lump-sum contribution.
Can I waive escrow on my mortgage?
Many lenders allow escrow waiver with 20%+ equity and strong credit (sometimes with a fee). The borrower then pays taxes and insurance directly. CTC notes escrow waiver availability by investor at intake.