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Budgeting for Homeownership
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If you're a homeowner, you’ve probably encountered the terms escrow advance and escrow shortage. Here’s a quick breakdown:
What is an Escrow Advance?
An escrow advance happens when the lender temporarily covers a shortfall in your escrow account to ensure taxes and insurance are paid on time. You’ll need to repay the lender over time through your mortgage payments.
What is an Escrow Shortage?
An escrow shortage occurs when your escrow account doesn’t have enough funds to cover taxes or insurance. You’ll need to pay the difference to bring the account back up to the required level.
Key Differences
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Escrow Advance: Lender covers the shortfall temporarily, you repay over time.
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Escrow Shortage: You pay the difference directly to resolve the issue.
Being aware of these terms helps you avoid surprises and ensures your payments stay on track. Keep an eye on your escrow account to stay ahead of potential issues.