Making Escrow Simpler Through Rocket Mortgage^®

What is an escrow account?

An escrow account is a fund set aside to pay your property taxes, homeowners insurance and mortgage insurance. Overall, the goal of an escrow account is to make life more manageable by spreading out the cost of taxes and insurance over the course of the year rather than paying taxes in one lump sum.

It’s important to note that there's also a type of escrow that you encounter during the home buying process. This type of escrow is typically used for holding your earnest money deposit, any seller contributions and more while the transaction is finalized.

For the rest of this post, we'll talk about the escrow account for your taxes and insurance, specifically a Rocket Mortgage® escrow account. The biggest benefit of having a Rocket Mortgage escrow account is that you’ll be protected during a real estate transaction, whether you’re the buyer or the seller.

There are several benefits of having a Rocket Mortgage escrow account, including the convenience factor. Rocket Mortgage splits up your payments into 12 manageable monthly installments. Rocket Mortgage will:

• Take care of the management of the account for you so that you never have to worry about it.

• Disburse your payments to your homeowners insurance company and pay your property taxes to your local taxing authority. This way, you’ll always know that your taxes and insurance will be paid on time.

In this section, we'll go over specific financial details regarding a Rocket Mortgage escrow account.

How Is The Minimum Escrow Account Balance Calculated?

Rocket Mortgage calculates a specific amount of money to put into your escrow account based on property taxes, homeowners insurance and mortgage insurance. Let's go over these.

• Property taxes: Property taxes are the local and state real estate taxes that have to be paid on a periodic basis to your local taxing authority such as your county, city or school district.

• Homeowners insurance: Homeowners insurance covers the cost of rebuilding or replacing your home in the event of damage. It also often includes liability coverage should an accident happen on your property.

• Mortgage insurance: If you have less than 20% equity in a conventional loan or have an FHA or USDA loan, a monthly mortgage insurance premium (or guarantee fee for a USDA loan) is often required. In any case, you make a monthly payment into your escrow account and your lender pays the premium. 

Each individual escrow item above is divided by 12 and rounded to the nearest cent. The items are then added together to get your new monthly escrow payment amount.

The minimum escrow balance provides a cushion in your account. The minimum required escrow balance is determined in accordance with the Real Estate Settlement Procedures Act (RESPA), your mortgage contract or state law. Any one of these entities could require up to 2 months of "cushion money."

How Is My Payment Calculated?

Your monthly mortgage payment typically includes principal and interest, along with taxes and insurance. The escrow amount will be divided into 12 monthly amounts for property taxes, homeowners insurance and mortgage insurance.

Will I Get An Escrow Refund From Rocket Mortgage?

Sometimes you become eligible for a Rocket Mortgage escrow refund. This occurs when your escrow account contains excess funds and you receive a check with the remaining balance.

An escrow refund will be determined during the annual escrow account analysis.

At least once per year, Rocket Mortgage performs a review of your escrow account to ensure that you have sufficient funds to cover your taxes and insurance.

When Will I Get My Escrow Analysis?

The timing of your escrow analysis depends on your state – each has a specific month in which escrow analysis occurs.

What Are The Outcomes Of An Escrow Analysis?

There are three possible outcomes to an escrow analysis. Your payment may stay the same, decrease or increase. Here's what happens in these three instances:

• Stay the same: If nothing changes with your taxes and homeowners insurance, things will continue as they were before and you should expect no changes for the next year.

• Decrease: When your taxes and/or insurance premiums decrease, you may have excess funds in the account, which will be returned to you if they're over $50. This is sometimes referred to as an escrow overage.

• Increase: You may face a shortage in your escrow account if your property taxes or homeowners insurance have gone up in the past year. If you have a shortage, you’ll have to pay the difference.

You have a couple of payment options if you're facing an escrow shortage:

• One-time payment: You can make a one-time payment toward your escrow account in order to make up for any shortage through the Rocket Mortgage website or the Rocket Mortgage app. Even if you pay the shortage in full, your escrow payment may still change. Other payment options will be available on your escrow analysis statement.

• Pay over the next year: You can also have the shortage amount added to your escrow payment in equal monthly installments over the next year. If you take no action, your shortage will automatically be handled this way.

Even if you pay the shortage in full, your escrow payment may still change.

Why?

If your taxes and/or insurance increase, dividing this new amount into 12 monthly payments means your monthly payment must also increase, otherwise, you will have a shortage again the following year.

A few features on your Rocket Account can help you keep track of your escrow information and prepare you for the future. Let’s briefly run through these.

Escrow Information Page

Our general escrow information page is available after your first disbursal from your escrow account. This page will show you the payments we’re taking out of your account for both your taxes and/or insurance and the payments we expect to make over the course of the year.

If you see a change in your taxes or insurance that you’re not expecting, this page will help you proactively contact your insurance carrier or taxing authority. You can also see the date of your next escrow analysis.

Tax And Insurance Payment History Page

How are your tax and insurance payments trending? What can you expect to pay in the future? Our tax and insurance payment history page will show you. You can quickly see what’s been paid out of your account, who the payment was sent to and when it was made.

From your history, we’re able to give you a look at the trend in your tax and insurance payments. This can help give you some idea of what you could expect to pay in the future.

If you would like to view your current escrow analysis statement or other pertinent mortgage documents, you can do so online in the Rocket Mortgage documents section.

A Rocket Mortgage escrow account makes escrow easier, with our handy tools to manage your account. View your escrow analysis statement or other pertinent mortgage documents or get started online with Rocket Mortgage.