Manage Your Own Escrow?

Can you manage your own escrow for taxes and insurance?

QUESTION: Rebecca asks if she can manage her own escrow for taxes and insurance.

ANSWER: You are not allowed to do this in most cases through a mortgage company.  Your typical FHA, VA, and traditional home loan require escrowing.  This means that you pay your principle and interest payments as well as your taxes and insurance – also called your PITI.  They do this to make sure the taxes and insurance gets paid on the house they have a loan against.  The bank or mortgage company doesn’t want you to lose the house and them to lose the money they loaned you.  It’s protection for their collateral.

Escrow is a hassle.  Half of the time it is calculated incorrectly and you can end up having lots of money tied up that would be better invested.  When you can do it on your own, you should if you’re going to be on a budget.  You have to be disciplined in setting aside the money since the bank or credit union isn’t making you do it.

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