jade houseWhen I first bought my house, there were plenty of things I didn’t understand. Points? Amortization? No idea. I still struggle with those; I’m not going to lie. Escrow? Now, that was one I had heard about, and had some idea about what it could be, but it was confusing at best. It took a few years of fluctuating payments and a few surprise overpayment checks for me to really get a handle on understanding my escrow account.

So whether you’re a long-time homeowner who still has no idea what you’re doing with your escrow account, or if you’re a first-time homebuyer who’s intimidated by it – you’re at the right place. I’m here to help you understand your escrow account.

What’s an escrow account?

The easiest way to think of an escrow account is as a savings account that is managed by your mortgage servicer. A portion of each mortgage payment you make is deposited into this account to cover your estimated real estate taxes and insurance premiums. It’s that simple.

How does an escrow account work?

Your mortgage servicer uses the money in the escrow account to make payments on your behalf for the taxes and insurance required under the terms of your loan. When the taxes and insurance premiums are due, they are paid directly by the mortgage servicer. The biggest benefit of an escrow account is that you can guarantee your bills will be paid in full and on time, without having to budget for a large payment separately.

How are your escrow payments determined?

Your mortgage servicer will estimate the amount that will have to be paid for your real estate tax and homeowners insurance bills. This estimate is based on information provided during closing, through the taxing authority and insurance company, or previous tax and insurance bills.

The estimated payment is then divided by 12 to determine the amount of the monthly payment, and that amount is added to your monthly mortgage statement.

Aside from taxes and insurance, what other bills are paid from an escrow account?

Your escrow account covers real estate taxes and insurance premiums like homeowners insurance and flood insurance. Escrow accounts do not pay things like homeowner association fees, personal property insurance, special or added tax assessments, or other fees.

What are the minimum balance requirements?

The Real Estate Settlement Procedures Act (RESPA) limits the amount to one-sixth of the total amount of items paid from the account, or approximately two months’ worth of payments. This minimum balance helps guarantee that if your taxes or insurance payments increase, you’ll be covered without facing a large and expensive shortage. Your account will be analyzed yearly to ensure you’re paying what you should – not less and not more than necessary. Once the analysis has been completed, any excess funds  will be returned to you.

What’s an escrow analysis?

As I mentioned, every year your mortgage servicer will analyze and review your account to make sure you’re paying the correct amount into your escrow account in order to maintain the minimum required balance. Increases or decreases in your annual tax or insurance bills may cause your monthly mortgage payment amount to change. If that’s the case, your mortgage servicer will provide you with a surplus or shortage statement to explain how this will affect your monthly mortgage payment.

Why have your taxes/insurance premiums gone down but not your payment?

Your escrow payment will only be adjusted during your yearly escrow analysis. If you want to adjust your payments sooner, contact your mortgage servicer.

What’s a shortage? What’s a surplus?

If the amount paid toward taxes and insurance was higher than expected, your account may have a shortage. That means you were paying toward an amount that was estimated too low. You were not paying enough into your escrow account to cover the actual cost of the bills. You‘ll be responsible for making up the shortage in your account and your monthly mortgage payment may rise as a result.

Typically you can pay the escrow account shortage in one of two ways:

  • Make a one-time payment of the full amount.
  • Pay the amount over 12 months by adding the extra amount to your regular monthly mortgage payment.

If the total amount of the bills was lower than expected, your account may have a surplus. This means you were paying more than what you should have and now you have extra money in your account. Great news, right?

Do you have to have an escrow account?

It’s the lender’s decision whether or not an escrow account is required. It’s not something that is regulated by the federal government or RESPA. However, many lenders require escrow accounts for government-backed loans like VA or FHA loans.

This is just a high-level overview of escrow accounts. Your mortgage servicer may have more detailed information that could help you gain a deeper understanding of your specific account information. Each servicer has its own way of approaching things like the escrow analysis statement, or how to make a payment if you have a shortage. But really, when it comes down to it, as long as you understand the basics I’ve covered here, you’ll be good to go on understanding how your escrow account works!

To learn more, speak with a home loan expert today!

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This Post Has 63 Comments

    1. Hi Robert:

      Sometimes it varies because we have to get the funds from your previous loan company. With that said, I’m going to have someone from our Client Relations team go ahead and look into this for you. Thanks for reaching out!

      Thanks,
      Kevin Graham

    1. That’s not good, Chris. I’m going to get this to our client relations team and see if we can get it straightened out.

      Thanks,
      Kevin Graham

    1. Hi Gary:

      I’m going to have someone from our Client Relations team look up your account information and make sure we get you that info. Thanks so much for reaching out!

      Kevin Graham

  1. I ALSO CLOSED ON A NEW LOAN WITH QUICKEN LOANS AND DID NOT HERE ANY THING ARE RECIEVED ANY ESCROW PAYMENT BACK FROM FROM MY OLD MORGAGE COMPANY, NATION STAR. THANKS STEVE HOFMANN

    1. Hi Steve:

      We would be happy to look into that for you and determine what’s going on with your previous escrow account. Our client relations team is off for Memorial Day, but expect to hear from us soon.

      Thanks,
      Kevin Graham

  2. i closed with you and i am looking at some of your replies to peoples concerns, some are yes or no question, but you did not indicate that, now i ask what is the deal? cos some of these question are still what we need to know about from you.

    1. Hi Benjamin:

      First, I want to thank you for choosing us! We look forward to serving you well into the future.

      I can definitely understand your frustration with not seeing public responses to many of the questions that are listed here. As with most items in the mortgage process, escrow questions sometimes involve very personal details regarding people’s financial situations. This is one reason why we might get them to someone who can go over the personal situation to determine the answer as applies to that client. Secondly, I’m not licensed to dispense mortgage advice. I try to answer questions on guidelines, but if I can’t find a factual answer, my job is to get you to someone who can give you the personalized advice you need.

      I hope this helps clarify things. I appreciate you asking.

      Thanks,
      Kevin Graham

  3. When we decided to do our refi with QL in March 2017 our agent with QL told us we probably will receive funds from our escrow account from our previous mortgage company. To date we have not heard anything from anyone on this subject. Is this a slow process?

    1. Hi Darlene:

      We can certainly have someone reach out and look into this for you. If nothing else, they should be able to give you more information on the process. Look for an email.

      Thanks,
      Kevin Graham

  4. I was assured that when I began a refinanced with Quicken on my existing Quicken Loan I would receive my escrow balance back. This was not the case I only received about $130 of my almost $3,500. I was told that I agreed when signing your preapproval checklist that I was allowing you to use that money to make payments for any oustanding insurance or taxes which I had none at the time. They used that money to pay off over 3k of my existing mortgage which was never told to me or put in writting. If you took that 3k and added it to my new mortgage it would be about $10 a month more on my new payment over 25 years. So why did you keep my money! The wrong answer which my math proves above would be to lower my payments which is what your representatives keep trying to tell me! As a hard working veteran it takes a long time to save up that 3k I was expecting to receive back!
    PS the consumer finance protection buearu seems to agree with me by the way!

    1. Hi Richard:

      I’m sorry to hear you’ve had this experience with us. We can certainly look into your escrow and payment issue. Thanks for reaching out and giving us the opportunity to look into this.

      Thanks,
      Kevin Graham

    1. Hey Derrik:

      Whether or not your escrow account can be removed depends on the type of loan you have in many cases. In most cases, the investor in your mortgage, whether it be Fannie Mae, Freddie Mac, the FHA or VA requires that you have an escrow account because it protects their investment if they know you’re paying your taxes and insurance. That being said, I’m going to have someone reach out to go over your situation. Thank you for choosing us!

      Thanks,
      Kevin Graham

  5. I read about escrow account we are first time buyers whole should I speak about this as we do not want our morgage to go up

    1. Hi John:

      If your property taxes or homeowner’s insurance go up, your mortgage payment is going to go up because you’ll have to put more into escrow. That being said, I’m going to have someone reach out to you about this to provide additional clarity.

      Thanks,
      Kevin Graham

  6. I closed with Quicken a year and a half ago, 3 months latter my loan was sold even though that was one of the questions I asked and told it would not be than the new loan people jacked up my escrow 100 dollars + a month, this loan was only three months old to begin with. Its not backed by the government can I stop the escrow and pay these bills myself. If its going to cost that much than I cant pay someone to do it for me

    1. Hi Greg:

      I’m going to have someone reach out to help look into this. Thanks for bringing your concern to our attention. We’ll be in contact soon.

      Thanks,
      Kevin Graham

  7. Hi,
    Closed with Quicken early Dec. Received check from Quicken but have not received anything from Bank of America, prior mortgage holder. Should I get $ from old escrow acct?

    1. Hi Larry:

      I don’t think that’s what’s happening, but if you are being charged twice for your homeowners insurance, you shouldn’t be. I’m going to have someone reach out to you about this to see what’s going on.

      Thanks,
      Kevin Graham

        1. Hi Larry:

          I’m going to have someone reach out to you about this and see if we can’t get its straightened around and see how your escrow account is going to work.

          Thanks,
          Kevin Graham

    2. It’s possible you can be charged in error by both parties the left-hand know not what right-hand is doing. Apparently the servicer need a letter from your insurance company showing coverage and vi / versa servicer. And if you have escrow account setup then let’s assume this is how taxes and insurance is getting paid through everytime you pay the mortgage. (Miscommunication) come to part here. Provide all proof to each parties that you have coverage escrowed if this the case, if not escrowed have insurance company ,servicer or you provide evidence showing where it’s paid from and who is paying it. It happen to me before this how I know what your direct concern was.

  8. Hi, I just received the tax notice for 2016 on my home. The mortgage closed on Sept 1. I know the escrow was funded with enough money to pay this but my tax notice says I don’t have a mortgage. How will it get paid? How will the escrow know the amount and will they automatically pay it?
    Thanks for your help!

    1. Hi Jen:

      I see you just closed with us. Congratulations! You should be okay, but I’m going to have someone reach out to go over your escrow question and look into whether we need anything.

      Thanks,
      Kevin Graham

    2. I just received my tax bill and it is due by November 30. The amount is 9,635.11. At closing Quicken set aside $10,591.30 to pay the taxes. Did Quicken get a copy of this tax bill, will it be paid by November 30 and what happens to the differential?

      Thank you.

      Becky van der Bogert

      1. Hi Rebecca:

        Depending on where you live, we most likely got your tax bill. It will be paid by the due date. In terms of what happens to the differential, I’m going to get this to someone on our servicing team that’s more knowledgeable than I am. I don’t want to give you the wrong information. Thanks for reaching out!

        Kevin Graham

      2. It happens time to time for a tax bill to be mailed to buyer in error if not escrowed or escrowed. Generally, the county folks can sometimes be behind what is going on and screwup mailing these tax bills to you and can make you fresco out. Don’t worry! Follow up with your servicer or lender.

  9. Hello,
    I just closed my loan in September 1. My taxes and home insurance will be included on my monthly payment. I have received property tax statement that is still under my name and previous owner. Do I need to send this information to Quicken loan ? Do I need to contact county tax collector to remove previous owner from my property tax?

    1. Hi Faranak:

      I’m going to have someone from our Client Relations team reach out and help you out with this one. Thanks for letting us know and we’ll get with you about next steps.

      Thanks,
      Kevin Graham

    1. Hi Brock:

      The investors in mortgages like Fannie Mae and Freddie Mac have guidelines to make sure their investment is a sound one. There are certain requirements for escrow accounts because the house can be taken away if taxes and insurance aren’t paid. We have to follow investor guidelines regarding your mortgage and escrow accounts are included in that. I hope this helps to at least answer your question.

      Thanks,
      Kevin Graham

  10. I just signed up with Q&L and noticed that my escrow account has all the money from my old mortgage company in it will I receive any of that back?

    1. Hi Pamela:

      I’m going to have someone reach out to you to go over exactly what’s going on in your situation. You often get a check back for the old escrow, but depending on the way the loan is structured, that’s not always the case. Look for an email from one of our team members who will be reaching out.

      Thanks,
      Kevin Graham

  11. My wife and closed on a refinance loan on July 15. An escrow account was set up on the loan. Today we received a refund check for a year coverage from our home insurance company. How do I know I can cash this check? who can tell me if the premium was already paid out of the new loan?

    Joe

    1. Hi Joe:

      I’m going to have someone from our client relations team reach out and get you to the right person to answer the question. Thanks!

      Kevin

    2. I closed a loan also in Dec. I also have an escrow acct set up. I also received a check yesterday from my homeowners for the total amount of one years coverage. I called my homeowners and they say they were paid twice. I’m not sure if I should cash this check or if I owe it to Quicken? If it’s been paid twice isn’t someone missing that money? I’d like to keep it but if it was sent to me by mistake I’d like to get it where it goes so I don’t owe it later.

      1. Hi Joann:

        That’s a good question, and you’re right to double check. I’m going to go ahead and get this over to our client relations team so we can look into this for you.

        Thanks,
        Kevin

  12. Hello Quicken,

    I recently closed on my first home with your company back on June 27th, and an escrow account for taxes and insurance was established as agreed. A few days ago, I received a statement of property taxes due from the county in which I live. I know I am not required to send this to Quicken, as they will collect that information from the tax company. However, this statement includes my name and the name of the previous owner. Does any additional or special action need to take place because of the previous owner being listed?

    Thanks in advance,
    Corey Hickman

    1. Hi Corey:

      I’m not sure about the answer to that question since the previous owner is included. I’m going to forward this to our client relations team. They’ll be in touch.

      Thanks,
      Kevin Graham

  13. Hello,
    I recently purchased my home. The tax bill is due soon and was sent to the previous owner. I got a copy from Township, but I do not believe Quicken would have received this to make the appropriate payment. How do I get it to the right place to make sure that happens?
    Thanks!
    Kevin

    1. Hi Kevin:

      I’m going to get this to the right people. Someone will be reaching out.

      Thanks,
      Kevin Graham

  14. I seen my insurance agent today and she said there is a payment this week on my house policy. Does quicken loans know this as I can’t find the answer in my closing paperwork thanks don

    1. Hi Don:

      I can definitely have someone reach out to you to make sure everything is in order. They’ll be in contact.

      Thanks,
      Kevin Graham

  15. My house insurance is due July 26, 2016. I talked to someone on Friday from Q & L and they said a check was sent in to my insurance company. The Lady from Q & L told me to contact my insurance company to make sure the bill had been paid. I was told to day that they haven’t received any payment yet. Now what do I do?

    Connie Schnitker

    1. Hi Connie:

      I’m going to have one of our team members reach out and look into this for you. Thanks for letting us know and we look forward to getting this straightened out!

      Kevin Graham

  16. Hi I and my insurance company State Farm have tried to contact Doug Dawson he has not called me back nor has he called my insurance company. I would like to know why my Taxes have not been paid as of yet? The money was taken out when we passed papers in May my taxes are due July 5th?? Also my insurance company did not know we changed finance company’s.

    1. Hi Donna:

      I’m sorry to hear you’re having trouble with your escrow payments. I’m going to have someone reach out so we can look into this and see about getting it resolved for you as soon as possible.

      Thanks,
      Kevin Graham

  17. I’d like to know ,,now that I refinanced with Q &L ,How long can my Previous Bank ( Mortgage Company) keep my escrow ?????,,,before it must send me the balance that was left in my escrow account ???? Now that my new Mortgage Co. is Q & L ? I closed on 5/12/16,,,,it is now 6/8/16. As of today, I have not received my escrow balance. I already called my Bank last week and could not get an answer. What is the Legal Time Frame? Thank you

    1. Hi Ed:

      I’m not sure of the answer to that question, but I’m going to get it to someone who may be able to give you more information. Thanks for choosing us! We really appreciate having you as a client.

      Thanks,
      Kevin Graham

        1. Hi John:

          I’m going to pass this along to our Client Relations team and get you the information you need. Thanks for reaching out!

          Kevin Graham

    1. Hi Sherry! If your mortgage is serviced by Quicken Loans, and has an escrow account, you don’t need to worry about sending us your tax bill – we collect that information from your tax authority for you. If for some reason we can’t
      get it from your tax authority, we will reach out to you to obtain the bill.

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