If your property were to be destroyed, the lender would lose its collateral, but keep in mind that this is why you need homeowner’s insurance. Insurance is a way of having protection “just in case”, you run into a problem. Taxes are mandatory, and escrow is helpful to set this up so that you don’t have to think about it. FHA escrow is required, but keep in mind that there are benefits for all involved.
When your taxes go unpaid, the state can foreclose on your home in order to obtain payment. This is not a pleasant thought right? Insurance is absolutely necessary, but keep in mind that no lender will let you close on a home without homeowner’s insurance, so you really can’t get around it. You can see why FHA’s mandatory escrow makes sense. The FHA escrow wants to be absolutely that it sets aside enough to cover your taxes and insurance for at least one year, and a little more in case your taxes and insurance go up. We all know that two things are certain and that’s taxes and death.
The FHA escrow will also reward you in the end when you pay the home off. Whatever you have in your FHA escrow will be refunded to you, do don’t sweat it. This is normal, and again it’s to make sure that in case your premiums go up that they have enough to cover everything.
For more information on FHA escrow regulations and requirements, you can visit my website at www.fhaloansnow.net.
-Mayer Dallal
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