Nick Pakulla - Mortgage Lender Loan Officer in MD, DC, VA

A little known option when shopping for a mortgage in Montgomery County Maryland is what's called an escrow waiver. 

- An escrow account is an account setup by your lender that is funded in advance to pay your property taxes and homeowners insurance automatically. 
- An escrow waiver is an option (usually comes with an additional fee) which enables you to pay your property taxes and homeowners insurance on your own (ie: not part of your monthly mortgage payment).  Note: Not all types of mortgages allow the borrower to waive escrows.

If you let the bank hold your escrows, the bank will pay your property tax and homeowners insurance bills as they come due.  The account maintains an average balance over the course of the year, where the bank earns interest on the balance in the account.  Also there are often shortages in an escrow account (ie: when property tax bill increases) that change your total mortgage payment each year when an escrow analysis is completed (ie: your total payment to your lender could go up or down based on the changed assessments).

Don't worry - Section 10 of the Real Estate Settlement Procedures Act (RESPA) limits the amount of money a lender may require the borrower to hold in an escrow account for payment of taxes, insurance, etc. See Hud's Escrow FAQ

Banks prefer to have the borrower pay into an escrow account because the bank can be sure that the property taxes and hazard insurance will be paid thus protecting their interest and investment in your property.

When you pay the escrows on your own you can ensure that these are paid on your own terms (and that the bank isn't earning interest on your money), however, you do have to deal with the hassle of ensuring that you will have enough liquid cash to pay the property tax and homeowners bills as they come due. 

Some homeowners prefer to have an escrow account even when a waiver is offered for free.  Having the escrow account means that some of your home ownership bills are taken care of and you as the owner don't have to worry about any large property tax bills or homeowners insruance bills coming due during the year.

Some lenders charge fees, normally .25 points in order to waive escrows.  However, my bank offers a free escrow waiver if you are interested.

If you would like to discuss a escrow waiver and how it may benefit you please call me at 301-585-7283.

Yes, the mortgage lending standards have become very strict, but there is proof that they are working!  The Quarter 2 2010 losses are the lowest they have been since the government took over Fannie Mae in 2008.  

I had a Realtor tell me that a family with documentable income of $35,000 per year was given a mortgage for a $1 million dollar property that she sold short last year.  Clearly, mistakes were being made across the board with lending standards being too relaxed.

Now the corrections have been made, and with some back-burner discussions about the ultimate fate of Fannie Mae and Freddie Mac I’m sure we’ll be seeing more changes coming down the pipeline.  While the changes make a Loan Officer’s job much harder and also puts an extra strain on borrowers (additional income verification, having to document almost every non-work related deposit, not open new lines of credit or make any significant purchases in-between application and closing... etc) – it all appears to be working! 

I am an optimist, so one could argue that 2009 until now is not long enough to know for sure if we are out of the woods, but I’m going to say that there is clear evidence we are just about there.