Home Buying in Little Elm>Question Details

Tami Lewis, Home Seller in Little Elm, TX

Since I have to pay one year of homeowner's insurance at closing, will my monthly mortgage and escrow payments be lower throughout the first

Asked by Tami Lewis, Little Elm, TX Fri Oct 12, 2012


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Escrows accounts are mandatory on Conventional loans (Fannie Mae & Freddie Mac) that are over 80% of the homes value. Unless you have a 1st and 2nd lien, therefore avoiding the over 80% rule on the 1st lien. Government insured loans (FHA, VA & USDA) require escrow accounts regardless of the Loan-To-Value. - http://www.trulia.com/voices/Home_Buying/is_it_better_to_buy…

Therefore, for the life of the loan you will be required to keep an excrow account. If you have a conventional loan that has been paid down or increased in value (appraised value) reducing your 1st lein to below 80% you can request escrows be dropped. However, you will be required to pay your property taxes in full each year and purchase a homeowners policy each year.

Reference link: http://titlecompanies.net/
3 votes Thank Flag Link Thu Jun 11, 2015
The answer is no. The lender requires that the first year of insurance premiums be paid upfront because insurance is paid in advance, not in arrears, like property taxes. At closing, the settlement statement will show that you have paid the first year in advance. Then, it will also show that you have paid 2 or 3 months more into the respective escrow accounts (for a cushion in the event that the property taxes increase and/or the insurance premiums increase in the future). Each year, you should get an escrow account detail report that may even refund a portion of what you have paid. But that is up to the lender. Likewise, the monthly escrow amounts could increase if the lender determines that increases are likely. They want to have at least 2 to 3 months extra in the accounts at all times.

So, when you close on your purchase, you will have already funded the escrow accounts and you monthly payments will begin on the first day of the following month. Your payments will include principal, interest, property taxes, and insurance (PITI). In some cases, you may also have to include mortgage insurance, depending on the type of loan and the loan amount as a percentage of the purchase price.
3 votes Thank Flag Link Fri Oct 12, 2012
No, because you won't have anything in your reserve account for homeowner's insurance.

You're paying the first year's premium up front, and next year at this time the reserve account will pay for another year. That can only be done if you've been paying 1/12th of the premium monthly to go into the account.

Congratulations on your new home!
3 votes Thank Flag Link Fri Oct 12, 2012
Makes sense. Thanks!
Flag Fri Oct 12, 2012
No what happens is that your homeowners insurance is total paid for the first year. One 12 of the total insurance cost is added to your mortgage payment each month. 3-4 months of your taxes and insurance are collected upfront during closing and placed in an escrow account.
2 votes Thank Flag Link Sat Oct 13, 2012
Chances are your lender require the one year insurance payment upfront. You will need to confirm that with your lender to make sure.

Good luck!
0 votes Thank Flag Link Sat Jun 13, 2015
Hi Danielle-

Brent is correct. But I'm concerned you were not able to ask your agent that has been helping you in your transaction? I hope you had quality representation. As an experienced and successful agent, I provide this information up front and before closing, especially if my clients are first time or even second time home buyers.

I know how frustrating the process can be if you're not familiar with all the details and procedures.

I hope you have a smooth closing and best of luck!

Best regards,

Sherry Renfroe
Ebby Halliday Realtors
1415 Legacy Drive, Suite 100
Frisco, TX 75034
(214) 215-4145
Mobile Site: m.sherryrenfroe.com
0 votes Thank Flag Link Sat Oct 13, 2012
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