During the Rent To Own process at Home Buyers Inventory  and toward the end of your term to lease option your home with us, you will be encountering some mortgage terms and as a newbie  in this field you will ask yourself, What is the meaning of this term and how does it work?

In this article we will be encountering new words and will discuss  them further. So the main topic will be, what is an Escrow and how will it affect your mortgage?

What is Escrow, and will it affect my mortgage?

When borrowers take out a mortgage, lenders often require them to pay into an escrow account. Lenders control the escrow account, and use it to pay property taxes and homeowners insurance on the borrower’s behalf. Each month, borrowers pay down principal and interest, while contributing to the escrow account.

If you place a down payment of 20% or more, your lender may choose to waive the escrow account. If they do, you can choose to pay your taxes and insurance yourself. However, your lender may offer a lower interest rate if you choose to establish an escrow account.

Other lenders may require you to pay into an escrow account, which may or may not affect your interest rate. If your lender requires an escrow, they must follow the Department of Housing and Urban Development’s rules on maintaining escrow accounts.

An escrow may not affect your interest rate, and will not change the type of mortgage. And because tax and insurance rates are variable, it’s very possible the amount you pay into escrow can change from month to month or year to year, even if you have a fixed-rate mortgage.

If you are unable to make a down payment of at least 20%, lenders may add private mortgage insurance to your escrow payments. You want to try to avoid PMI (Private Mortgage Insurance) if you can.  It can add $150-$300 a month to your mortgage payment.

You used to be able to cancel your PMI insurance.  However, that is no longer the case if you have an FHA loan, which is the type of loans that have a lower than 20% down payment.  

Luckily here at Home Buyers Inventory, when you execute your option to purchase your home the down payment you put down at the beginning of your term, goes toward your purchase price.  The banks love this. It will be a part of your % down payment, no matter what loan type you choose with the bank. Your location also affects monthly escrow payments. If you live in an area prone to flooding or fires, for example, your insurance payments may be higher. Your escrow will increase as a result.

Here in Homebuyers Inventory we are hands on in helping people to get their dream home all throughout the process, from the start of the process up to giving you your home keys.  So if you want to learn more about us. Visit our website at www.homebuyersinventory.com  or our Facebook and twitter.

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