The Role of an Escrow Account in Your Southern California Real Estate Transaction
Many clients often inquire, “What bills will an escrow account cover?” It’s an essential question during a real estate transaction and, as always, we’re here to provide clarity on all your queries before, during, and after the escrow process. Make the most of our rich experience and knowledge during your property dealings.
Bills Covered by the Escrow Account
Now, let’s address the core question: “What bills will an escrow account cover?” Your escrow account will be used to pay for:
- Property taxes
- Homeowners insurance
- Mortgage insurance (if required)
- Flood insurance (if required)
However, certain expenses will need separate payment:
- Interim tax bills, special or added tax assessments, and other fees not included in your property tax bill
- Homeowners association fees (if applicable)
- Supplemental tax bills (if applicable)
- Premiums for non-required insurance policies, such as personal property insurance
Determining Your Escrow Amount
Another valid question might be, “How is my escrow amount determined?” The estimation of your escrow amount involves assessing the probable costs of your taxes and insurance for the upcoming 12 months (1 year). This calculation is based on the loan closing documents, taxing authority, and insurance company. This total is then divided by 12 and added to your monthly mortgage payment. Finally, we evaluate whether your account will maintain the minimum balance required each month or if your payment needs adjustment to keep the account balanced.
The Need for an Escrow Account
Having an escrow account comes highly recommended, regardless of our status as an escrow company. If your down payment is less than 20% of the property’s value, maintaining an escrow account becomes mandatory. Even if it’s not a requirement, an escrow account is advantageous as it helps you manage large expenditures like property taxes and insurance premiums without needing to save and pay for them separately. It simplifies the process by merging mortgage and escrow payments into a single monthly payment. Additionally, when your property tax and insurance bills are due, we’ll make the payments on your behalf using your escrow account.
Why Choose Us?
If you reside in South Bay, you have various escrow companies to choose from. However, none match the level of professional service provided by Neighborhood Escrow. Being the most trusted escrow company in South Bay since 1985, we’re here to cater to your escrow needs. We offer meticulous escrow services to all buyers, sellers, lenders, and borrowers, ensuring every detail is taken care of. Allow us to facilitate a seamless real estate transaction. Contact us today at 310-378-2456 to get started.
