Depending on the type of loan and your specific situation, your lender may require an escrow account. An escrow account, also referred to as impound or trust account, is an account for paying your property taxes and insurance premiums as well as any other charges. Expect to have an escrow account for FHA loans and loans with a down payment of less than twenty percent.3 As a borrower, you can also request an escrow account from your lender, even if it’s not required.
Because property taxes are collected by most counties twice per year, many find the prospect of paying this large bill daunting. With an escrow account, your lender is collecting a prorated amount monthly. That’s why Forbes explains that “for many borrowers, having the lender responsible for paying taxes and insurance out of the escrow account is a welcome convenience.”4