Vanderbilt Mortgage Deconstructs Mortgage Escrow for Homebuyers

MARYVILLE, Tenn., July 21, 2015 /PRNewswire/ -- Vanderbilt Mortgage and Finance, Inc., a Berkshire Hathaway company, is explaining mortgage escrow accounts for its consumers to help clarify escrow's role in the home buying process.

Getting a mortgage and purchasing a home is a big decision with several steps involved in the process. One part that new homebuyers sometimes find confusing is the mortgage escrow account. To simplify this part of the mortgage process, Vanderbilt Mortgage and Finance, Inc., is providing a quick explanation of escrow. 

"Escrow is an unfamiliar word that can sound intimidating, but at the end of the day, it's a simple concept," President of Vanderbilt Mortgage and Finance, Inc., Eric Hamilton said. "Part of our business is helping customers understand the mortgage process better, and part of that is making sure concepts like escrow are clearly explained."

Vanderbilt Mortgage is providing answers to the following frequently asked questions to give customers a better understanding of escrow:

• What is escrow?
  • Escrow is a process where additional money is collected, along with the periodic mortgage payment, and specifically used to pay taxes and home insurance premiums. This additional payment amount is deposited into a separate account established for this purpose called an escrow account. Funds held in an escrow account can only be used to pay property taxes and home insurance premiums.

• What are the benefits of having an escrow account?
  • An escrow account ensures that the homeowner has enough money to pay property taxes and home insurance premiums. Holding these funds in escrow keeps the homeowner from having to separately save and pay large lump sums at one time since taxes and insurance payments may add up to large amounts.

• How is the escrow amount calculated?
  • The formula for calculating escrow is fairly simple. The total tax and insurance bills for the following year are calculated with the sum then divided by the number of payments per year. The additional amount is then added to the mortgage payment. Any changes in insurance premiums or property tax rates that occur after this calculation will alter the amount of escrow added to the mortgage payment. This calculation is done annually. Some lenders also provide an "escrow cushion" where an additional dollar amount is added to help avoid shortages.

• How are taxes and insurance paid through escrow?
  • The mortgage company deposits the additional money collected into the escrow account and uses those funds to pay the insurance premium and property taxes on behalf of the homeowner when they become due. Typically, the insurance company will bill the lender directly for home insurance premiums. For property taxes, the local taxing authority will send the tax bill to the mortgage company which then pays the bill. Having an escrow account helps ensure that insurance payments and property taxes are paid on time.

For more guides on the mortgage and home buying processes, such as tips for managing credit scores, visit vmfhomeloan.com.

About Vanderbilt Mortgage and Finance, Inc.

Vanderbilt Mortgage and Finance, Inc. is a national housing lender that specializes in financing manufactured homes. In business for more than 40 years, the company currently services more than 180,000 home loans and works hard to tailor loans to each family's needs. Vanderbilt has an A+ grade from the Better Business Bureau and is a Berkshire Hathaway company. For more information, visit VMFHomeLoan.com.

NMLS Disclosure

Vanderbilt Mortgage and Finance, Inc., 500 Alcoa Trail, Maryville, TN 37804, 865-380-3000, NMLS #1561, ( http://www.nmlsconsumeraccess.org/), AZ Lic. #BK-0902616, Loans made or arranged pursuant to a California Finance Lenders Law license, GA Residential Mortgage (Lic. #6911), Illinois Residential Mortgage Licensee, KS Licensed Mortgage Co. (SL.0000720), Licensed by the NH Banking Department, Mississippi Licensed Mortgage Company, MT Lic. #1561, Licensed by PA Dept. of Banking.

Photo - http://photos.prnewswire.com/prnh/20150720/238519 

SOURCE Vanderbilt Mortgage and Finance, Inc.

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