How Do Escrows Work When Purchasing A Home
DDA Mortgage • August 16, 2021
When you close on your new home, you're going to put money into an escrow account to cover three things. You need to escrow money for your taxes, escrow money for your homeowners' insurance, and escrow money for PMI.
Here's how it works.
Why do I need to escrow money for taxes?
Taxes on your property are collected annually. However, when you buy a home, the responsibility for paying the annual tax is split between you and the seller. For example, if you close on June 1st, you are responsible for 6 months, and the seller is responsible for 6 months.
Escrow ensures everyone covers their share of taxes.
Why do I need to escrow money for insurance?
The lender requires you to have homeowners' insurance to cover their loan. The escrow for homeowners' insurance ensures your coverage at closing. Escrow will cover a full year's premium and any additional months for a given year.
At DDA Mortgage, we believe it is essential that you understand every step of the mortgage process.
Contact us today, and we will walk you through what to expect when financing a home.
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