On FHA loans, your taxes and insurance must be escrowed which means the monthly payment that the lender requires will automatically include and force you to pay for principal/interest/taxes/insurance/mortgage insurance in every monthly payment.
Unfortunately, you cannot pay for annually.
So my homeowners insurance and yearly taxes are going to be included in my monthly mortgage payment. Instead of paying into the escrow monthly can I pay it upfront when I close and then pay it yearly to knock $140-180 off my monthly mortgage payment?
It’s an FHA loan and I’m already going to be paying for PMI monthly.
Hi and welcome to MyFICO
FHA mandates that a loan insured by them comes with an escrow account.
And, actually, you are paying upfront when you close. The monies you are paying into escrow monthly is for the following year.
Example: Let's say you are closing Oct. 1 and that your property taxes are $3K and your home owner's insurance is $750. Prior to closing or at the table you have to show proof that you paid the $750 for the insurance policy. So, the $62.50 you are paying monthly into escrow is for the renewal policy starting the following October. Depending on your state, property taxes may be paid twice a year. So at closing $1.5K is paid upfront into escrow and your monthly payment of $250 goes toward the second part of the year of property taxes.
Hope this makes sense.