Some great answers below, and one other thing to consider if you are not taking a loan that requires an impound account (FHA, VA, greater than 90% LTV). If you structure your loan without impounds you can add them later. The servicer will do an escrow adjustment and your payments will change accordingly and usually via a few options to fund the escrow account.
But...if you take a loan with an impound account at origination, you cannot have it removed in the majority of cases. The loan is securitized that way.
As for the impounds at closing, you will likely have to place 3-6 months in the account to satisfy your lender. However, not all lenders will require it, so you just have to work with their guidelines. It depends on several factors, including your down payment, loan type, etc. Discuss it with your lender.
It's a shell game of sorts and quite silly but the bottom line is that the answer to your question is yes and no. Please also note that California law does not allow a lender to force impounds if your LTV is under 90%, not 80% as in most other states. By under 90% I mean 89.9%. At 90% you must impound. Smart loan officers rarely write loans in CA at 90% LTV for this reason, it gives consumers more options to structure it at 89.9%
So if you must escrow insurance and tax because of low down payment or whatever reason, work on perfecting your credit first to get the lowest interest rate possible.
Check this link below for more info.
There is a difference, because lender do prefer collecting and then paying taxes on your behalf.
If your loan was locked with an impound/escrow account, you might still have the opportunity to opt-out at a cost of one eight to a quarter of a percentage point.( on a loan of 300K, this will represent a fee of $375 to $700)
We usually cover it for our borrowers, but some lenders might charge you for it (or, which will be extreme increase your rate)
Senior Loan Consultant
All California Mortgage
A Division of APMC
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
NMLS 304353 - BRE 01380701
Yes that is correct. Getting it impound however will make your monthly payment and obligation a little easier to handle because they are all in one bill. You wont have to think about taxes every six months and the insurance payment will be part of that.
If you have further questions or needing assistance in locating that house you're looking for. Feel free to call me at 323-500-7690.
Sellstate Preferred Properties
17207-2 Ventura Blvd. Encino, CA 91316
CA BRE 01935066
In California, impounds are only required if your loan-to-value is 90% or more or if you're getting an FHA loan or a VA loan.
Some lenders will charge 0.25 point for not having impounds.
Elva A. Wormley
C2 Financial Corporation
2845 Moorpark Avenue, Suite 209
San Jose, CA 95128
NMLS #331981 / DRE #01274093
Some people like to hold onto their money and pay taxes and insurance themselves. Others like to send one payment and know the lender will pay them for them.