As stated before this is not a state requirement but a lenders. Normally with most conventional loans the lender can have a six month reserve. This is mandated by federal insurance guidelines as I understand it. There was a huge lawsuit about 10 years ago when many lenders were keeping 12-18 months in reserve. Of course, these were non-interest bearing and the banks were making out like bandits.

So calculations are done based on when you close and when taxes are due. Insurance is yearly and you bring a full year to the table so it is normal to just collect 6 months so one the anniversary date of your closing there will be a 6 month reserve after renewing the policy.

Md,

Just so you realize...they are not escrowing 12-14 months it all depends on when you settle on the house. Also it is not voluntary if you are putting less than 20% down or if you are utilizing FHA or VA. It is now mandatory with lending institutions.

Jennifer Daywalt, Realtor
Re/Max Results Realty - Collegeville
Top Agent 2004 2005, 2006, 2007, 2008
Author of "Ask The Realtor" Column in The Saturday Edition of The Phoenix Newspaper
Licensed since 2001 in PA
610-489-7355 Main Office
610-999-7693 Direct Line
Sellinghomesjenn@aol.com

PA doesn't require any escrow...the lender does. And its often a negotiable point in the loan process. Remember that any escrowed funds still belong to you: they simply are being held by the lender, in your name, for the sole purpose of paying real estate taxes when they come due. Some owners feel the service is worthwhile, freeing them of the task of coming up with tax payments every 6 months: others prefer the control be theirs, both their money until tax payment is due, and in terms of insuring tax payments are made on time.

But if you agree to let the lender escrow your money, typically the amount is equal to from 12-14 months of taxes. If youpaid that money at settlement, then sold the home the next day (yes, unlikely, but just an illustration), the lender would refund the money to you.

Good Morning Md,

It depends on when you settle your property and when the taxes are due in the area you are purchasing. In Chester/Montgomery County for example most of the areas in those counties have the township/borough and county taxes due in March (they cover the taxes from 01/01 through to 12/31) and the school taxes would be due in August (they cover July 1 through to June 30th of the next year). Therefore if you close a property on November 1st your first mortgage payment would be due on December 1st and you would have paid 4 months into your escrow account towards the March bill. (December, January, February, March) The mortgage company would then escrow 8 months worth of those taxes so when they do come due you have a full 12 months worth of payments in the account. In addition with the same above scenerio you would have paid 9 months of school taxes (Dec-Aug) therefore they would escrow 3 months worth of school taxes. There is also an aggregate adjustment made as the mortgage companies are not allowed to "cushion" your escrow account so there would be a small credit to those amounts, however that amount is unknown until the HUD Sheet is completed (usually a day before settlement). In addition you will pay the seller back taxes they have already paid that you will benefit from. If you settle again November 1st, you would reimburse the seller November & December of Township/Borough and County and for school you would reimburse them November-June. Normally a total of one year's worth of taxes is paid at settlement between your escrows and your reimbursement to the seller. I hope this helps. Have a great day!

Jennifer Daywalt, Realtor
Re/Max Results Realty - Collegeville
Top Agent 2004 2005, 2006, 2007, 2008
Author of "Ask The Realtor" Column in The Saturday Edition of The Phoenix Newspaper
Licensed since 2001 in PA
610-489-7355 Main Office
610-999-7693 Direct Line
Sellinghomesjenn@aol.com