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I too don't think it was an option when I purchased, I think it was a mortgage requirement. Property taxes and insurance are paid out of escrow along with the mortgage. I actually like the system, 2 less things I have to think about. I just pay one lump sum monthly, and even that is on autowithdrawal from my bank so all I have to do is make sure I have enough in that acccount. Haven't had a late payment in 8 years. Knowing myself I probably would have if not for this system.
I have had some bad experiences with bank escrow accounts. If you have an option I would opt to pay your taxes and insurance separately. I have a separate savings account set up and I have the taxes and insurance directly deposited in that account each pay period.
I'm with wire. This "option" is the best thing on a home mortgage. Just have to worry about one payment, not 3. Then, when taxes come due in September for the year, we're ready! But I don't think it's considered an option on home loans around here.
Most lenders will require this but in my case with WF you could get rid of it is you had at least 20% equity. It is convenient in terms of budgeting, but they can and do screw up the escrow payments. WF underpaid my county tax by literally $1.50 or something like that, leading to ne getting a delinquent bill from the county. Of course on principle I jumped through a huge number of hoops to make them correct this and reimburse me. In the end I think they cut me a check for $25.
Tax and insurance escrows are required on FHA, VA, USDA, and on Conventional loans with less than 20% down.
It does come down to personal budgeting: do you (can you) save the entire year's tax bill and pay that big chunk, likely during the Holidays? You might also get a slight improvement on terms if you DO escrow taxes and insurance.
We purchased in Dec 2011 via Provident Funding and opted to pay our own ins and taxes separately.
Make things all under my control w/o any escrow office goof ups or any other problems. Also allows extra principal payments if you find yourself with extra $$ at certain times of the year.
Just make 100% certain you have funds set aside for the ins and taxes when they are due.
Most lenders actually charge you a quarter of a point if you waive your escrows, even with 20% down. You become a higher risk of foreclosure when they aren't in control of your money, so they're going to protect themselves a little more. That fee can sometimes be waived if you have extra high credit scores, but usually .25% of the loan amount at closing.
I'm in NJ and we put down 20%. Our original lenders required us to escrow PT and insurance when we bought our house in 7/2012. I'll just tell you that it's a complete nightmare when you change insurance companies and have to constantly follow up with customer service to get the insurance escrow correct. We're on our 4th mortgage company in less than a year (they keep selling our mortgage to other banks and servicers) and it doesn't help that the call centers, in most cases, have been offshore...
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