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Escrow Query

I am on FHA loan since Apr 2010 in texas. Is it mandatory to have an escrow account with the mortgage company?  if not then how easy is it to not have the escrow account with the mortgage company? Are there any laws which govern this?
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March 01 2011 - Frisco
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Good Evening Groovypash,

Because you have an FHA Loan with MIP, you are required to have an escrow account. Only after the MIP is removed would it be possible to not have the escrow account. There is no guarantee that the lender will allow you to remove the escrow account though. Once you have met the FHA requirement (which is for the escrow to be included when MIP is being paid) then it is up to the investor to allow you to remove the escrow or not.
For your loan (assuming a 30 year fixed rate mortgage) you'll have to have MIP on your account for AT LEAST 5 years or until you have reached a 78% Loan To Value ratio (which ever takes longer).

I am not suggesting that you do this because of the cost, but the only way you can remove the MIP at this point is to refinance your home. Depending on your loan to value ratio, you may need a first and second mortgage to do it. Again, I am not suggesting it unless you can benefit from the interest savings.

* Please note that I am making some assumptions because I do not know the actual details to your account other than you have MIP, FHA, and you purchased in April 2010. *

Hope that helps.
John Cannata
www.TexasLoanGuy.com
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March 01 2011

John answered it well, yes it is required and no you cannot get rid of it until you reach a 22% equity point in the home.  Which right now would be a long while.

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July 16 2011
 
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