Escrows Explained: Should You Waive Them?

Let’s take a closer look at one of those tricky homebuying terms: escrow.

Traditionally, escrow accounts were required when a buyer put down less than 20%. But today, that’s not always the case. Some lenders allow escrow waivers with as little as 5% down, and some VA loan lenders even allow escrows to be waived with no down payment at all.

So why would someone choose to waive escrows? One reason is control. Some buyers don’t like the idea of someone else earning interest on their money while it builds up in an escrow account.

Others like that they can set up month-to-month billing with their insurance company.

But waiving escrows isn’t for everyone. While you may be able to pay insurance monthly, property taxes are typically due all at once. That means you have to be disciplined — saving throughout the year, setting aside a tax refund, or earmarking a bonus so that bill doesn’t catch you off guard.

And one important note: you can’t waive escrows for flood insurance. If your home requires flood insurance, the government says that it must be escrowed.

And remember — it’s always okay to ask. We’re here to help you get home.