We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is Escrow Analysis?

By Luke Arthur
Updated: Feb 18, 2024
Views: 10,812
Share

An escrow analysis is a process used to determine the condition of an escrow account. When buying a home, individuals will often opt for a mortgage with an escrow account attached. With this type of account, the taxes and insurance for the property can be paid with the mortgage payment. Escrow analysis is an annual process used to determine if the escrow account is funded properly.

The amount of the mortgage payment is determined by the amount of money that is needed in the escrow account. Escrow accounts have to have a certain amount of money in them in order to meet the necessary requirements associated with this type of account. An escrow analysis is used to determine how much money is going to be needed over the course of the next year and whether the current mortgage payment is going to be enough to fully fund the account.

After an escrow analysis is completed, sometimes there will be a surplus. If there is a surplus, the escrow company is going to take out the extra money and give it back to the borrower. In this case, the borrower is going to receive a check in the amount of the overage.

In some cases, the escrow analysis will show that the account is underfunded. When this happens, the shortage is going to have to be made up in one of two ways. The mortgage company is going to notify the borrower of the shortage and let him or her decide how to fix the problem.

The borrower will be able to choose to make up the shortage in one lump sum. If this is the choice, the borrower will then have to issue a check to the mortgage company in the amount of the shortage. The other option he or she has is to increase the mortgage payment over the course of the year. For example, if there was a $120 US Dollars (USD) shortage in the escrow account, the mortgage payment would be increased by $10 USD per month to make up the difference.

Changes in the needs of an escrow account can occur for several reasons. The most common reason for changes is when the homeowner's insurance premium increases. After a homeowner has had a loss in the house, the insurance rates could increase. The taxes on the property will also fluctuate a bit from one year to the next.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Editors' Picks

Discussion Comments
Share
https://www.wise-geek.com/what-is-escrow-analysis.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.