Mortgage Help   Mortgage Rates Real Estate Credit Foreclosure Tax Mortgage Rates  Mortgage Basics Chapter 1: How much house can you afford? Homeownership Should You Buy or Rent Summary   Chapter 2: Adjustable-rate mortgages ARM and a fixed-rate mortgage Fixed-rate mortgages Understanding the key elements Which type of lender is right for you? Other types of mortgages Subprime Summary   Chapter 3: Your credit score Down Payment How lenders set rates Low down payments Mortgage insurance Your mortgage payment Mortgage Points Summary   Chapter 4: The good faith estimate Inspection and Insurance Necessary paperwork for a buyer Other lender paperwork Paperwork and fees Prequalification and preapproval Special circumstances Summary   Chapter 5: Ten questions to ask Turned down for a mortgage Underwriting What lenders ask Summary   Chapter 6:  Understanding the closing process Escrow Summary   Chapter 7: When your mortgage is sold Avoiding foreclosure Paying ahead Payment changes Refinancing Removing mortgage insurance Summary Escrow At closing, you will be required to deposit prepaid real estate taxes and insurance premiums into an escrow account. This account ensures that the taxes and insurance for the property are paid and on time. This protects the lender from any tax liens or uninsured losses that you can't repay. The lender cannot require an escrow amount of more than two months payment, according to the federal Real Estate Settlement Act. The escrow amount is usually adjusted on an annual basis. The amount in the escrow account varies due to tax assessments and insurance premium adjustments. The lender will cover any shortfalls and adjust your monthly mortgage payment to make up for any increases in taxes or insurance premiums. Your monthly mortgage payment may fluctuate from year to year, even if you have a fixed-rate mortgage. Some lenders will allow you to pay your own property taxes and insurance premiums, especially if you put more than 20% down. But many lenders will raise the interest rate to make up for the additional risk that this creates. Once you have an escrow requirement, it is hard to get a lender to cancel it. If your loan is sold, and there is nothing in the transaction that provides for the cancellation of the escrow account, you are at the mercy of your new mortgage servicer.