Understanding Settlement Costs:

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Escrow accounts are accounts that are created to manage the funds that have been established to pay the reoccurring costs associated with a mortgage loan. Your mortgage lender will manage this account by taking the payment portion designated in your monthly payment and holding those funds until the taxes, fire insurance and mortgage insurance (if necessary) become due. These account balances are managed to ensure that the necessary funds are available when due. If your taxes or insurance costs increase, you will incur a shortfall and your payments will be increased to cover the shortfall.

Escrow account statements are sent to the borrowers to advise them as to the amounts paid in their behalf. It will show a beginning account balance, what checks were made in payment of taxes and fire insurance, and the dates paid and leaving a year end balance.

Section 5: Homeownership

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