Escrows Guidelines in Florida

Know What to Expect

Really Not That Bad . . .

    A typical question that arises for many customers is whether or not to escrow. If you are doing any FHA loan you will be required to escrow. FHA requires it. If you are doing any type of conventional Fannie Mae Freddie Mac loan above 80% loan to value you will be required to escrow. (That is where you will pay PMI) Anything less than 80% loan to value, the customer has the right to waive escrows for a small fee which is usually absorbed by the mortgage lender. A secondary part of the refinance discussion is the discussion as to how we are going to treat your escrows.

This page discusses what happens with your money in your escrow account when you refinance your mortgage and have to cover 10 months of insurance escrowed as well as 10 months of taxes. That can run into a sum of money so you have to make sure you have a plan that is right for you.

  • you can waive escrows and pay taxes and insurance on your own once a year. Banks would rather have you escrow because that results in less headaches for them later.
  • you can swop escrows by determining your balance with your current mortgage lender and then set your new loan amount so you are writing a check at closing for the amount of money you will be re-imbursed in 4 to 6 weeks.
  • You can let the loan amount cover everything (if you can) and close your loan without writing a check. When you receive your current escrow balance back from your current mortgage lender , go have fun with it or put it in the bank or a combination there of.

1.) Setting the new loan to cover the escrows is the most painless way.

2.) Waiving escrows is where you pay your insurance and taxes on your own. This option is O.K for the customer who doesn't mind writing two large checks once a year but I do not recomend this for a typical salaried employee who has limited savings and watches each paycheck. If you don't budget your money well, writing that check might hurt a little bit once a year when the insurance is do and once a year when the taxes are do.

3.) Swopping escrows is where we calculate what your existing escrow balance is and what you will be getting back in 3-5 weeks and then set the new loan amount where you are writing a check for that same amount of money at closing. This works to keep your new payment lower because for each $1000 in mortgage loan that you finance, the monthly payment goes up approximately $6.50 per month. Shaving $5000 in your escrow swop will save about $30 a month in payment for the life of your loan.

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