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Simple Real Estate Definitions : Tax And Insurance Escrow

Escrow taxes and insuranceAs a homeowner in Boulder , your fiscal responsibility extends beyond just making mortgage payments. You must also pay your home’s real estate taxes as they come due, as well as your homeowners insurance policy premiums.

Failure to pay real estate taxes can result in foreclosure. Failure to insure your home is a breach of your mortgage loan terms.

There are two methods by which you can pay your real estate tax and homeowners insurance bills.

The first method is to pay your taxes and insurance as the bills come due, usually semi-annually. Depending on your home’s tax bill size and the cost to insure your home, these payments can feel quite large — especially if you’ve failed to budget for them properly.

The second method of paying your taxes and insurance is to give your lender the right to pay them on your behalf, a process known as “escrowing for taxes and insurance”.

When you escrow your real estate taxes and homeowners insurance, you pay a portion of your annual obligation to your lender each month, which your lender then holds in a special account for you, and disperses to your taxing entities and insurance company as needed. Lenders prefer that homeowners escrow taxes and insurance because, in doing so, the lender is assured that tax bills remain current and that homes stay insured.

Want a discount on your next mortgage rate? Tell your lender that you’re willing to escrow.

To help calculate your monthly escrow payment to your lender, do the following :

  1. Find your home’s annual real estate tax bill
  2. Find your home’s annual homeowners insurance premium
  3. Add the two figures and divide by 12 months in a year

The quotient is your monthly “escrow”; the extra payment you’ll make to your lender each month along with your regularly scheduled principal + interest payment. Then, when your tax bills and insurance premiums come due, your lender will make sure the payments are made on your behalf.

If you’re unsure whether escrowing is right for you, talk to your loan officer and/or financial planner. There are valid reasons to choose either path.

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What To Ask Your Lender When Getting A Loan.

When showing homes in Boulder Colorado to first time home buyers, I often get the following question, “Do you know a good lender?” Of course I do, and I usually recommended three that I have done business with over the years.  It’s best to interview at least three mortgage companies to find the best fit for you. But then what?   Because now is the time to buy in Boulder and the surrounding areas, homebuyers are abundant and many have never been to a lender before.  Recently at an open house, a couple of first-time homebuyers asked me what they were supposed to ask the lender at the interview.  It’s a great question and many first timers make the mistake of not asking the right questions, so I came up with some of the most popular questions  to ask a lender regarding a loan.
Top Twenty Interview Questions To Ask Your Lender

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