Making escrow simpler through Rocket Mortgage

This article is for informational purposes only and is not intended to provide, and should not be relied on for, medical, legal, financial, or tax advice. You should consult with a qualified professional for advice specific to your situation. Consumers should independently verify that any services, products, or programs referenced meet their needs and comply with applicable requirements.

When you own a home, keeping track of different bills and due dates can be a hassle. An escrow account enables you to spread payments for property taxes and insurance into your monthly mortgage payment.

At least once a year, your mortgage servicer will complete an escrow analysis to make sure that you have the right amount of money in your account. You might still be wondering “What is an escrow analysis, though, and how does it work?” We’ll answer that here. What is an escrow account?

An escrow account allows homeowners to spread the cost of real estate taxes, homeowners insurance, and mortgage insurance, if applicable, throughout the year.

For conforming conventional and VA loans, you’re not required to have an escrow account as long as you're current on your tax payments and have none upcoming in the next 45 days.¹ To avoid an escrow account with a VA loan, you need a 620 credit score. Other lenders may have different policies, and requirements may change.

FHA loans do require an escrow account.² USDA loans require escrow accounts in most cases. Rocket Mortgage doesn’t offer USDA loans at this time.

If your loan includes an escrow account, an escrow analysis is completed at least once a year to help ensure the correct amount is being collected to cover property tax and insurance payments.

What are the perks of having a Rocket Mortgage escrow account?

There are several benefits of having a Rocket Mortgage escrow account:

• Property tax, homeowners insurance, and mortgage insurance (if applicable) are split into manageable monthly amounts.
• Included as part of your mortgage payment, with the ability to set up autopay if you want.
• Avoids accidentally missing real estate tax or hazard insurance payments.
• Periodic analyses make sure you’re paying the correct amount for your property costs.

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 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. Your servicer 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. At maximum, servicers 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?

Upon escrow analysis, you may receive an escrow refund if the amount in your escrow account exceeds the total amount required for taxes and insurance payments after any cushion is applied.

If the overage in your account is less than $50, you can get a check or request that we apply it to your existing mortgage balance or future escrow payments. If the amount in your account is $50 or more, we legally have to send it back to you.

An escrow refund will be determined during the annual escrow account analysis. If you’re behind on your payments, you’ll receive your refund when your mortgage becomes current again.

Yearly escrow account review

At least once a year, Rocket Mortgage performs a review of your escrow account to ensure that you have sufficient funds to cover your taxes and insurance.

When will I get my escrow analysis?

Escrow analysis generally occurs once a year, but because servicers prefer to do all the loans within a state in a specific month, they’re allowed to do a short-year analysis within 45 days of establishing your escrow account to get you on the cycle for your state.

The following table shows the escrow analysis schedule at Rocket Mortgage.

What are the outcomes of an escrow analysis?

There are three possible outcomes to an escrow analysis. Your payment may stay the same, decrease, or increase. Here's what happens in these three instances:

• Stay the same: If nothing changes with your taxes and homeowners insurance, things will continue as they were before and you should expect no changes for the next year.
• Decrease: When your taxes and/or insurance premiums decrease, you may have excess funds in the account, which will be returned to you if they're $50 or more. Otherwise, you have the option to have it applied to your escrow account or mortgage balance. This is sometimes referred to as an overage or escrow surplus.
• Increase: You may face a shortage in your escrow account if your property taxes or homeowners insurance have gone up in the past year. If you have a shortage, you’ll have to pay the difference.

Escrow shortage payment options through Rocket Mortgage

You have a couple of payment options if you're facing an escrow shortage:

• One-time payment: You can make a one-time payment toward your escrow account in order to make up for any shortage through the website or the mobile app. Even if you pay the shortage in full, your escrow payment may still change. Other payment options will be available on your escrow analysis statement.
• Pay over the next year: You can also have the shortage amount added to your escrow payment in equal monthly installments over the next year. If you take no action, your shortage will automatically be handled this way.

Understanding future escrow

Even if you pay the shortage in full, your escrow payment may still change.

Why?

If your taxes and/or insurance increase, dividing this new amount into 12 monthly payments means your monthly payment must also increase. Otherwise, you’ll have a shortage again the following year.

Our escrow information resources

A few features on your Rocket Account can help you keep track of your escrow information and prepare you for the future. Let’s briefly run through these.

Escrow information page

Our general escrow information page is available after your first disbursal from your escrow account. This page will show you the payments we’re taking out of your account for both your taxes and/or insurance and the payments we expect to make over the course of the year.

If you see a change in your taxes or insurance that you’re not expecting, this page will help you proactively contact your insurance carrier or taxing authority. You can also see the date of your next escrow analysis.

Tax and insurance payment history page

How are your tax and insurance payments trending? What can you expect to pay in the future? Our tax and insurance payment history page will show you. You can quickly see what’s been paid out of your account, who the payment was sent to, and when it was made.

From your history, we’re able to give you a look at the trend in your tax and insurance payments. This can help give you some idea of what you could expect to pay in the future.

If you would like to view your current escrow analysis statement or other pertinent mortgage documents, you can do so online in the documents section.

The bottom line: Rocket Mortgage can help manage your escrow account with ease

Keeping track of property taxes and homeowners insurance is simpler when you let your servicer handle the payments. A Rocket Mortgage escrow account helps you avoid missing important deadlines and gives you peace of mind throughout the year.

Ready to review your escrow details or access your account tools? Sign in to your Rocket Account today.

¹Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

²Rocket Mortgage is not acting on behalf of FHA or HUD.

Rocket Mortgage is a trademark or service mark of Rocket Mortgage LLC or its affiliates.