Could someone please explain escrow and taxes and mortgage insurance?
You got it right: you pay into the escrow account, and they pay your property taxes and mortgage insurance out of that account. That’s how the mortgage company guarantees that they get paid. They don’t want to leave it up to you, because if you don’t pay the taxes, the state can take your house, making it hard for the lender to get paid back. Similar with the mortgage insurance: they may require you to have it, and that’s how they make certain you’re paying it. If it makes you feel any better, you do get interest on the balance in the escrow account, at least in my home state. The rules vary state by state. Some states will let you close the escrow account when you’ve paid off a certain (large) percentage of the loan. At the very least, they’re forcing you to realize that the property taxes MUST be paid. You’re going to be paying 12*($X+200) every year whether you want to or not; the taxes are not optional and you can’t forget about them. It’s less flexible for you to have to pay it in
