I take it this is the first property you have ever purchased with mortgage financing. Since you reference Clayton Homes, I am assuming that you purchased a manufactured home and financed with a lending arm of Clayton Homes (Warren Buffet's company owns Clayton Homes, BTW).

Escrow accounts can be confusing at first. Yes, as long as you have your loan you will have an escrow account. I don't know much about the mobile home industry, and nothing about how hazard insurance policies are written for them. I have never heard of a multiyear hazard policy for a stick built home, at least my insurance carrier has never offered me the option of purchasing a multiyear policy.

If you think the insurance premiums are too high, maybe you can do better if you shop around for your own policy. If you purchase a policy from another company, you should be able to cancel your existing policy without penalty.


Look up the amount for your most recent property tax bill and add that to the amount of your most recent annual hazard insurance premium. Divide this total by 12 to get the amount you need to contribute to your escrow account each month to pay the bills when they come due. Multiply your monthly escrow payment by 2 to get the minimum amount you can have in your escrow account and still have a two month "cushion". By federal law, the maximum cushion the lender can require is 2 months. As far as I am aware, all national lenders use a two month cushion.

Once you see the minimum amount you need for your cushion, take your current escrow balance and add one month's escrow payment. Do this for twelve consequetive months, and keep a running balance for the escrow account. During the month when your hazard insurance premium is due, deduct the amount of your insurance premium from your escrow account. Do the same thing with your property tax bill. Now check your running balances. If the difference between the lowest balance in the account during the coming year and the two month cushion amount is negative, you will have an escrow shortage. If the difference is positive, you have an escrow overage. Shortages are divided by 12 and added to your monthly escrow payment each month to make up the shortfall. You should also have the option of making up the difference in a single lump sum payment. If you have an overage greater than $50, it will be refunded to you or used to reduce your loan balance whichever you prefer. If the overage is less than $50. it will just stay in your escrow account.

This is the essence of an escrow analysis. The lender does this for you every year and sends you a copy of their computations.


That I can not help you with. You get rid of this lender when you pay off your mortgage. If you would feel more comfortable with another lender, perhaps you could refinance with another lender (you will still have an escrow account if you get a conforming loan)


Your monthly mortgage payment has four components -- Principal, Interest, Taxes, and Insurance, often abbreviated as PITI. If you have a fixed rate loan, the total principal and interest amount don't change for the life of the loan. The tax and insurance components are variable and could change every year. Each year, about a month before the anniversay of your loan, your escrow account will be analyzed. The analysis will use the latest amount paid for insurance and property taxes to compute the monthly escrow payment you will need to make during the next twelve months. So, yes, if your total tax and insurance payment for the year is less than it was for the previous year, your monthly payment should be less on the next anniversay of your loan.


Yes, they are right up to a point. If you have a fixed rate mortgage, your monthly payment only changes once a year, on the anniversay of your loan. If your escrow analysis shows that less is needed to maintain your escrow account than you had been paying, your monthly payment will be reduced accordingly on the anniversary of your loan, but not before.


If you have a fixed rate loan, then your monthly principal and interest payments stay the same for the life of you loan. Any extra amounts paid to reduce your mortgage balance just pays your loan off faster, but does not reduce the monthly payment amount. For example, let's say you have a $100K mortgage balance at 6% fixed for 30 years. Your monthly loan payment is about $600. You will make 360 loan payments of $600 each before your loan is paid off in full. Escrow payments are extra deposit amounts paid with your loan payment, but do not reduce your loan balance. At the end of the first year of your loan, the loan servicer tells you that you have an escrow surplus of $1000. You tell them to apply it to your mortgage balance. Your monthly loan payment will still be $600 per month, but now it will only take you 351 monthly payments to pay off your loan instead of 360. Just paying an extra $1000 toward your loan balance at the end of first year of the loan took nine monthly payments off the end of your loan -- you just saved $5400 in loan payments.

If you have a variable rate loan, then your loan payment amount adjusts each year on the anniversay of your loan to reflect changes in the interest rate and/or reductions in the loan balance. Making extra principal payments during the year will reduce the monthly payment required to pay off your loan. You will still make 360 monthly payments, just pay a smaller amount toward principal and interest if the interest rate has not gone up.


Hope this helps you see that noone is out to screw you. An escrow account is your money, and always is your money. It is just being held "in escrow" for you by the loan servicer. They can't use your escrow money to fund their operations.

thanks dave for dumbing down for me
it makes much clearer sense now
now i'm considering refinancing for a lower rate with same term
before = 15yr - 9.25% (already paid for 2yr)
considering = 15yr - 6.25/7% (start over)
stupid question, but would you do? (open to anyone's response btw)

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