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What is impound for taxes and insurance?

Profile picture for monikao1
I am 2 weeks away from the closing date on the purchase of my first home, my mortgage banker all of a sudden hit me today with something about almost $4000 for impound set up for taxes and insurance, we have discussed what I would need out of pocket by the time closing came around and she never mentioned this until today. What exactly does this mean?
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November 01 - Running Springs
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Profile picture for Justin Kennedy
Contributions: 352
Zillow All-Star

Since September 2009

Gregorio is spot on, this question should have been asked and funds need to close disclosed before you even made an offer to purchase. if this is a VA, FHA, USDA loan you have to have impounds. if conventional loan with LTV's at or below 89.9 will have an option to wavie the impounds account. if not able to wavie, your broker should help with a credit or reduction to your closing cost.
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November 04
Profile picture for Gregorio Denny
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Contributions: 3717
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Since January 2009

If you are under 90% Loan to value, you do not have to do this. You may have to pay a 1 time fee to waive them but it may be in your best interest to do so. 

All of this should have been discussed with you in advance and included on your GFE. If you found this person through Zillow, please post who they are because this practice of not disclosing impounds is borderline fraud. 
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November 01
Profile picture for wetdawgs
Contributions: 4121
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Since January 2009

As part of your monthly mortgage payments, you will be paying for principal, interest, plus taxes and insurance.    With taxes and insurance, they have an escrow account that is designed to have enough money in the account when the bill comes due.  Therefore, when closing on a house usually this escrow account needs substantial funding so that they can pay the upcoming insurance and tax bills.

Once a year the escrow account tends to get adjusted (usually upwards) and continues to be funded by part of your monthly payment.

  
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November 01
Profile picture for loansbytracy
Contributions: 486
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Since November 2009

That means that the lender has to set up an escrow account to hold your real estate taxes and homeowners insurance in until they come due next year and the lender will pay them on your behalf from this escrow account... at closing several months of taxes and insurance is collected to start the account... This should have been talked about at loan application...Hope this helps!
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November 01
 

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