What is an escrow account?
An escrow account is typically established at the time you close your mortgage loan. This account is held by the lender for the future payments of recurring items relating to the mortgaged property, such as real estate taxes and insurance premiums (hazard and mortgage), as they become due. Lenders usually require you to pay an initial amount for each of those items to start the reserve account at the time of closing. Below an 80% loan to value, you are not required to have an escrow account. You always have the option of paying your own property taxes and home owners insurance thereby reducing the amount of money you would need to pay at your time of closing. In Arizona, most lenders charge a fee to waive these escrow accounts.
An escrow account is money that is deposited with a third party other than the buyer and the seller — to be used to pay various fees. A borrower typically provides funds that will pay taxes, mortgage insurance, lease payments, hazard insurance premiums, and other payments. These funds are placed in the escrow account until the payment is due.
