Question:

How to read your annual escrow account disclosure statement?

Answer:

The annual escrow account disclosure statement has to be presented to you by the lender. You have to be able to read how escrow activity was conducted for the past year. The annual escrow account disclosure statement should also show expected change of escrow funds for the next year, and any possible increase or decrease of necessary funds.

Usually, the escrow account includes several month payments for property taxes and homeowners insurance plus up to 2 month escrow cushion waiting to be applied towards taxes and insurance when those become due. The annual escrow account disclosure statement on construction loans will only show land taxes in the beginning; have in mind, when tax begins to be charged for both land and house, the annual escrow account disclosure statement may not show the correct tax amount projected for the next year.

On your total mortgage payment, principal and rate may not increase, but your monthly payment is most likely to change due to increase or decrease of property taxes and hazard insurance to pay with the escrow account.

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