VA Loans_ How Escrow Works

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VA​ ​Loans:​ ​How​ ​Escrow​ ​Works There​ ​are​ ​two​ ​types​ ​of​ ​escrow​ ​accounts:​ ​One​ ​is​ ​used​ ​during​ ​the​ ​purchase​ ​process.​ ​The​ ​other​ ​is used​ ​after​ ​home​ ​has​ ​closed;​ ​it​ ​holds​ ​funds​ ​for​ ​periodic​ ​payments​ ​that​ ​will​ ​be​ ​required​ ​on​ ​the home,​ ​such​ ​as​ ​property​ ​taxes​ ​and​ ​homeowner's​ ​insurance. Escrow​ ​Account​ ​During​ ​Home​ ​Purchase Earnest​ ​money​ ​may​ ​be​ ​required​ ​on​ ​a​ ​home​ ​purchase​ ​before​ ​the​ ​down​ ​payment​ ​is​ ​made;​ ​it​ ​acts as​ ​a​ ​guarantee​ ​that​ ​the​ ​prospective​ ​buyer​ ​will​ ​follow​ ​through​ ​with​ ​the​ ​purchase.​ ​Usually,​ ​earnest money​ ​is​ ​not​ ​refundable​ ​after​ ​a​ ​specified​ ​number​ ​of​ ​days.​ ​Both​ ​the​ ​earnest​ ​money​ ​and​ ​the purchase​ ​agreement​ ​are​ ​deposited​ ​with​ ​a​ ​financial​ ​institution​ ​or​ ​title​ ​company​ ​until​ ​the​ ​purchase is​ ​completed.​ ​The​ ​title​ ​company​ ​or​ ​the​ ​financial​ ​institution​ ​acts​ ​as​ ​an​ ​independent​ ​and​ ​impartial party​ ​during​ ​the​ ​time​ ​the​ ​home​ ​purchase​ ​is​ ​in​ ​process. Escrow​ ​Account​ ​After​ ​Purchase Although​ ​the​ ​VA​ ​does​ ​not​ ​require​ ​escrow​ ​accounts​ ​on​ ​mortgages,​ ​many​ ​lenders​ ​require​ ​them​ ​to make​ ​sure​ ​that​ ​the​ ​insurance​ ​remains​ ​current​ ​and​ ​the​ ​property​ ​taxes​ ​don't​ ​become​ ​delinquent. The​ ​VA​ ​doesn't​ ​prohibit​ ​lenders​ ​from​ ​requiring​ ​an​ ​escrow​ ​account​ ​on​ ​VA​ ​loans​ ​and​ ​some lenders​ ​will​ ​use​ ​an​ ​independent,​ ​third​ ​party​ ​to​ ​manage​ ​the​ ​escrow​ ​and​ ​payments​ ​made​ ​from​ ​it. The​ ​borrower​ ​may​ ​receive​ ​annual​ ​statements​ ​from​ ​the​ ​third​ ​party​ ​rather​ ​than​ ​the​ ​lender. If​ ​the​ ​seller​ ​is​ ​agreeable,​ ​he​ ​or​ ​she​ ​may​ ​pay​ ​some​ ​of​ ​the​ ​initial​ ​costs​ ​of​ ​the​ ​loan,​ ​such​ ​as​ ​the initial​ ​escrow​ ​payment.​ ​VA​ ​permits​ ​the​ ​seller​ ​to​ ​pay​ ​a​ ​maximum​ ​of​ ​4​ ​percent​ ​of​ ​the​ ​loan​ ​in concessions​ ​to​ ​the​ ​buyer. The​ ​total​ ​annual​ ​premium​ ​for​ ​property​ ​insurance​ ​and​ ​taxes,​ ​plus​ ​other​ ​fees​ ​that​ ​may​ ​be required,​ ​are​ ​divided​ ​by​ ​twelve​ ​and​ ​added​ ​to​ ​the​ ​total​ ​mortgage​ ​payment.​ ​This​ ​results​ ​in​ ​the total​ ​monthly​ ​payment​ ​for​ ​the​ ​buyer​ ​and​ ​should​ ​be​ ​included​ ​when​ ​calculating​ ​the​ ​amount​ ​for which​ ​the​ ​buyer​ ​is​ ​qualified.​ ​A​ ​deposit​ ​may​ ​be​ ​required​ ​at​ ​closing​ ​to​ ​cover​ ​the​ ​impound​ ​account for​ ​the​ ​first​ ​year's​ ​escrow​ ​account​ ​but​ ​federal​ ​law​ ​limits​ ​the​ ​amount​ ​of​ ​the​ ​escrow​ ​to​ ​be​ ​held. Each​ ​month,​ ​the​ ​additional​ ​amount​ ​paid​ ​by​ ​the​ ​borrower​ ​is​ ​deposited​ ​into​ ​the​ ​escrow​ ​account and​ ​when​ ​it's​ ​time​ ​to​ ​pay​ ​the​ ​annual​ ​insurance​ ​or​ ​the​ ​semi-annual​ ​property​ ​taxes,​ ​the​ ​amount​ ​is deducted​ ​from​ ​the​ ​impound​ ​account​ ​and​ ​sent​ ​to​ ​the​ ​appropriate​ ​entity. Usually,​ ​the​ ​buyer​ ​selects​ ​the​ ​insurance​ ​company,​ ​sets​ ​up​ ​the​ ​account,​ ​and​ ​then​ ​provides​ ​the billing​ ​information​ ​to​ ​the​ ​lender.​ ​The​ ​buyer​ ​is​ ​responsible​ ​for​ ​contacting​ ​the​ ​tax​ ​collector regarding​ ​any​ ​property​ ​tax​ ​credits​ ​or​ ​adjustments​ ​that​ ​are​ ​available.​ ​The​ ​buyer​ ​is​ ​also responsible​ ​for​ ​obtaining​ ​the​ ​best​ ​homeowner's​ ​insurance​ ​rate​ ​possible.​ ​The​ ​financial​ ​institution or​ ​the​ ​third​ ​party​ ​pays​ ​the​ ​bills​ ​but​ ​cost-effectiveness​ ​is​ ​the​ ​responsibility​ ​of​ ​the​ ​buyer.


The​ ​escrow​ ​account,​ ​sometimes​ ​referred​ ​to​ ​as​ ​an​ ​impound​ ​account,​ ​will​ ​be​ ​recalculated annually​ ​to​ ​adjust​ ​for​ ​an​ ​increase​ ​in​ ​property​ ​taxes​ ​or​ ​insurance,​ ​so​ ​the​ ​total​ ​payment​ ​may​ ​rise slightly​ ​each​ ​year.​ ​Lenders​ ​are​ ​required​ ​by​ ​law​ ​to​ ​furnish​ ​an​ ​annual​ ​statement​ ​to​ ​the​ ​buyer, disclosing​ ​the​ ​disposition​ ​of​ ​the​ ​escrow​ ​funds​ ​and​ ​the​ ​calculations​ ​used​ ​to​ ​arrive​ ​at​ ​the​ ​new monthly​ ​escrow​ ​payment. Advantages​ ​of​ ​An​ ​Escrow​ ​Account By​ ​utilizing​ ​an​ ​escrow​ ​account,​ ​the​ ​lender​ ​is​ ​assured​ ​that​ ​the​ ​payments​ ​will​ ​be​ ​made​ ​timely without​ ​having​ ​to​ ​wait​ ​for​ ​the​ ​homeowner​ ​to​ ​remit​ ​payment.​ ​The​ ​homeowner​ ​avoids​ ​the​ ​burden of​ ​large​ ​lump​ ​sum​ ​payments​ ​for​ ​taxes​ ​and​ ​insurance,​ ​which​ ​can​ ​put​ ​a​ ​strain​ ​on​ ​finances. Mortgage​ ​Originator​ ​Jimmy​ ​Vercellino,​ ​specializing​ ​in​ V ​ A​ ​Loans​,​ ​helps​ ​veterans​ ​use their​ ​VA​ ​loan​ ​benefit​ ​to​ ​their​ ​greatest​ ​advantage.​ ​For​ ​more​ ​details​ ​call​ ​us​ ​at 480-351-5904.​ ​Visit​ ​site:​ ​https://www.valoansforvets.com/va-pre-loan-faq/ The​ ​views​ ​expressed​ ​here​ ​are​ ​those​ ​of​ ​the​ ​individual​ ​author​ ​and​ ​do​ ​not​ ​necessarily represent​ ​those​ ​of​ ​First​ ​Choice​ ​Bank​ ​(NMLS​ ​#:​ ​177877)​ ​and​ ​First​ ​Choice​ ​Loan Services​ ​Inc.​ ​(NMLS​ ​#:​ ​210764),​ ​7600​ ​E.​ ​Doubletree​ ​Ranch​ ​Road,​ ​Scottsdale​ ​AZ 85258.​ ​Equal​ ​Housing​ ​Lender.​ ​www.fcloans.com/disclaimer/ ​ ​www.fcbhomeloans.com/privacy


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