Making Escrow Simpler Through Rocket Mortgage^®

What is an escrow account?

An escrow account is a fund set aside to pay your property taxes, homeowners insurance and mortgage insurance. Overall, the goal of an escrow account is to make life more manageable by spreading out the cost of taxes and insurance over the course of the year rather than paying taxes in one lump sum.

It’s important to note that there's also a type of escrow that you encounter during the home buying process. This type of escrow is typically used for holding your earnest money deposit, any seller contributions and more while the transaction is finalized.

For the rest of this post, we'll talk about the escrow account for your taxes and insurance, specifically a Rocket Mortgage® escrow account. The biggest benefit of having a Rocket Mortgage escrow account is that you’ll be protected during a real estate transaction, whether you’re the buyer or the seller.

What Are The Perks Of Having A Rocket Mortgage Escrow Account?

There are several benefits of having a Rocket Mortgage escrow account, including the convenience factor. Rocket Mortgage splits up your payments into 12 manageable monthly installments. Rocket Mortgage will:

• Take care of the management of the account for you so that you never have to worry about it.

• Disburse your payments to your homeowners insurance company and pay your property taxes to your local taxing authority. This way, you’ll always know that your taxes and insurance will be paid on time.

Rocket Mortgage Escrow Account Management

In this section, we'll go over specific financial details regarding a Rocket Mortgage escrow account.

How Is The Minimum Escrow Account Balance Calculated?

Rocket Mortgage calculates a specific amount of money to put into your escrow account based on property taxes, homeowners insurance and mortgage insurance. Let's go over these.

• Property taxes: Property taxes are the local and state real estate taxes that have to be paid on a periodic basis to your local taxing authority such as your county, city or school district.

• Homeowners insurance: Homeowners insurance covers the cost of rebuilding or replacing your home in the event of damage. It also often includes liability coverage should an accident happen on your property.

• Mortgage insurance: If you have less than 20% equity in a conventional loan or have an FHA or USDA loan, a monthly mortgage insurance premium (or guarantee fee for a USDA loan) is often required. In any case, you make a monthly payment into your escrow account and your lender pays the premium. 

Each individual escrow item above is divided by 12 and rounded to the nearest cent. The items are then added together to get your new monthly escrow payment amount.

The minimum escrow balance provides a cushion in your account. The minimum required escrow balance is determined in accordance with the Real Estate Settlement Procedures Act (RESPA), your mortgage contract or state law. Any one of these entities could require up to 2 months of "cushion money."

How Is My Payment Calculated?

Your monthly mortgage payment typically includes principal and interest, along with taxes and insurance. The escrow amount will be divided into 12 monthly amounts for property taxes, homeowners insurance and mortgage insurance.

Will I Get An Escrow Refund From Rocket Mortgage?

Sometimes you become eligible for a Rocket Mortgage escrow refund. This occurs when your escrow account contains excess funds and you receive a check with the remaining balance.

An escrow refund will be determined during the annual escrow account analysis.