Homeowners Insurance up front and rolled into the first year?

 We are in the process of purchasing our first home, we were told by
our Realtor that we would have to pay for insurance up front for the
first year and it would also be included in the mortgage. Our broker
worked out our mortgage with the insurance included  - even in the
first year. I do not understand why we would pay double? The house is
in Ohio. Any helpful comments?

Thanks,

Chad

  On Jun 6, 9:47 pm, ckramer7...@gmail.com wrote:

You pay up front for the first year at closing.  Then every month you
pay 1/12th of the annual premium and it is held in an escrow account
so that when the premium for the second year is due, the money is
available and waiting in the account, and the mortgage company sends
it to the insurer.  It works just like the property tax money placed
into the escrow account.  They are simply collecting it ahead of time
so you don't have to pay it all at once.

 wrote:

Depending on your circumstances, the mortgage holder, etc. there is
another alternative.
Don't escrow the money.  Save it up on your own and earn interest.
Pay your own taxes and insurance.
If you are not the type of person to diligently save, this option is
not for you.  Also, some mortgage companies charge an extra fraction
of a percent if you do this.  This "compensates" them for the loss of
the free money to earn interest for themselves.

 
We live in Texas and we pay for own property taxes and insurance.  I believe
though that there is a requirement for making at least a 20% down payment
(and I think, but I'm not 100% sure) a very good credit rating.  Putting 20%
down in most cases (I believe FHA loans require a 22% down payment) will
also eliminate PMI requirements.

I've been told by mortgage companies that they are not allowed to make
interest on escrow accounts, but I do not pay any extra fee for handling my
own escrow account.

Chris in Pearland, TX
 

 
Most of those rules are lender's rules -- not government regulations.  I was
once told by a lender that the govt required an escrow account for a VA loan,
AND that they dictated a particular accounting method that was "good" for the
lender and "bad" for me...

Turned out the regulation ALLOWED the escrow account, but did NOT require it.
Also, the accounting method the lender cited was specifically warned AGAINST in
the VA regulation, because it was seen as abusive to the home buyer.

I got my monthly escrow payment reduced substantially after sending the lender
a copy of the complaint I sent to the state banking board...



That's hogwash.  They make an enormous amount of $$ on escrow accounts --  
that's why so many lenders require them!

A few credit unions even pay the homeowner a portion of the interest on their
escrow accounts...