Impound or Escrow Account Deposits
An impound (or escrow) account is an account used when the lender will be paying your homeowner's insurance and property taxes on your behalf. You prepay the amounts due into the account and the lender pays the costs as they come due. The amounts normally required to be prepaid at the time of closing are: (1) two months of homeowner's insurance, and (2) the amount the lender will need to pay the property tax installment due plus a two month reserve to make additional tax payments as needed.

If private mortgage insurance (PMI) is required on your loan, you will always be required to prepay those premiums (usually two months worth). In addition, typically 1/12 of the annual premiums or installments is collected with your monthly payment on an on-going basis.

Impound accounts are required by lenders in most states, particularly when the amount your loan-to-value ratio (loan amount divided by property value) is greater than 0.8 or 80% (75% for refinancing with cash out). When an impound account is required by the lender, you can often waive the use of an impound account for the homeowner's insurance and property taxes for a fee. However, you will always have to prepay your PMI (if any) into an impound account.