Escrow Account Waiver Mortgage Guidelines on Conventional Loans
This article will cover escrow account waiver mortgage guidelines on conventional loans. What are escrow waivers for conventional mortgages? As the spring mortgage market heats up, FHA Bad Credit Lenders are receiving more questions regarding ESCROWS. Many clients like having mortgage escrows. Some do not want their money tied up in an escrow. In this blog, we will detail what it means to have a mortgage escrow, when you must have an escrow account, and when you may get an escrow waiver.
What Are Escrow Accounts Required By Lenders
What is a Mortgage Escrow Account? When you own a home, you will be responsible for paying your property taxes and homeowners insurance. Whether you have an escrow account, you must pay these home-related expenses. The easiest way to think of an escrow account is; a separate account where your funds are held to pay property taxes and homeowners insurance when they are due next. This account will have funds added to it each month as you make your monthly mortgage payment. Alex Carlucci, a senior experienced loan officer at FHA Bad Credit Lenders and also known as the three-legged dog issued the following statement:
Each mortgage payment will hold 1/12 of your annual property taxes and 1/12 of your annual homeowner’s insurance premium. As there are 12 months in the year, the next time these bills are due, they will be paid directly from your escrow account.
It is important to understand that the funds in an escrow account are yours. If you sell or refinance your home, the money in your escrow account will be refunded within 30 days of closing. The same is true if you pay your mortgage off in full.
Is Escrow Account Mandatory?
When is an escrow account mandatory? All borrowers are required to have an escrow account when utilizing an FHA, VA, or USDA mortgage. Any government-backed mortgage requires an escrow account. Any conventional mortgage under 5% will also require an escrow account. Alex Carlucci, FHA Bad Credit Lender’s three-legged eight-year-old blind, deaf, three-legged dog, said the following:
An escrow account is put in place to protect the lender from you defaulting on your property taxes or falling behind on your mortgage insurance premiums. Many lenders charge an escrow waiver fee for conventional mortgages. That fee can be built into the rate or a separate fee by itself.
In the past, you needed to put down 20% on a conventional mortgage before being eligible for an escrow waiver. We are excited to roll out escrow waivers for clients with a 640-credit score or higher with just a 5% down payment. That’s right. We now offer escrow waivers for conventional mortgages with a 95% loan to value!!
High LTV With No Escrow Account Required
What are some advantages of 90% LTV without an escrow account? We have all been following the news and seeing the rising stock market. Many clients wish to invest their money versus entering it into an escrow account. Understanding the risks of investing is important, but this can be a great tool for creating passive income. Our three-legged friend, Alex Carlucci of FHA Bad Credit Lenders, said the following:
If you waive an escrow account, it is important to budget carefully. Failing to pay your property taxes can result in losing your home. Failing to pay your homeowner’s insurance premium will force the lender to add “forced placed insurance” to your mortgage.
Force-placed insurance is incredibly expensive and has terrible coverage. For more details, please see the CFBP’s Advise On Forced Place Insurance. This is not a path you want to go down.
Layered Risk In Having a Mortgage Escrow Account
If you do set up an escrow, it is the lender’s responsibility to pay your property taxes and insurance promptly. When you have an escrow account, paying these house-related expenses becomes automatic. These bills become out of sight, out of mind, and you are guaranteed not to miss a payment. If you waive an escrow account, you are 100% responsible for ensuring these expenses are paid on time. If you do not, you can end up with a tax lien on the property or forced placed homeowner’s insurance, stated above.
Why is this such a big deal? Allowing an escrow waiver with a 5% down payment is a huge deal. The reason is this can slash upfront costs associated with the loan. For example, On a $300,000 mortgage, a borrower waiving escrows could save $3,000 (depending on property taxes). Alex Carlucci added the following statement:
The borrower would not be required to impound their funds into this escrow account at closing but keep the funds in their bank. With a credit score of 640 or higher and automated approvals through Freddie Mac and Fannie Mae, borrowers are no longer required to put down 20% to waive escrows. Consumers need to have options when it comes to mortgage financing.
We are excited to roll out this program, especially for cash-short first-time home buyers. Allowing clients to keep more money in their pockets is important. For any questions regarding escrow accounts, don’t hesitate to contact us at FHA Bad Credit Lenders at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. We are direct mortgage lenders without LENDER OVERLAYS who also have access to unique mortgage programs such as this 95% LTV escrow waiver program. We are available 7 days a week for any questions and are ready to get working for you. Please reach out today.
