First Time Home Buyers

Buying your first home can be one of the most exciting times of your life. It's important to understand the facts and what exactly will take place so you are prepared and make the right decisions.

One of the first things you need to figure out is whether or not you should have an escrow account. An escrow account is an account set up by your mortgage or financing company through which your home insurance, property taxes, and private mortgage insurance can be paid. When you first close on your home, you "fund" the escrow account by paying a pro-rated year's worth of insurance premium and property taxes in your closings costs. After that initial closing cost up-front pay out, every month with your mortgage payment you will make an escrow payment that will pay a month's worth of home insurance, private mortgage insurance, and property taxes.

Most mortgage companies require new home buyers to have an escrow account. You must always have an escrow account unless you have made at least a 25% down payment on your home. It is their way of making sure that you stay on top of not only your home insurance payments, but also your property tax payments.

If you have an escrow account, setting up your insurance is easy. Once you have found an insurance policy you feel comfortable with, you need to do two simple things:

• Give your agent your mortgage brokers name, phone number, and company name
• Give your mortgage broker your agent's name, phone number, and company name

After that, your work is done until closing! Your agent and mortgage broker will work together to ensure that the insurance is in place by the time you close.

If you do not have an escrow account, you need to do a little more work to get your home insurance in place. Once you have found a policy you feel comfortable with, you need to:

• Confirm the specific closing date with your mortgage broker
• Give your mortgage broker your agents information, so he/she can make certain the mortgage company is listed as an additional insured on the policy
• A week or so before closing, make an initial payment on your insurance policy, and set up payment schedule

We recommended that you do not pay for the home insurance until a week or so before closing. The reason for this is that most insurance companies have fully earned policy fees. That means once they have started a policy for you and received payment, even if your home does not close, they will keep a certain amount of your down-payment. If your home is in escrow, you don't need to worry about this because no payment is taken until all the papers have signed.