Buying a house is a big deal, so first of all, congratulations! However, if you’re a new homeowner, or perhaps an experienced homeowner who just hasn’t yet figured out what an escrow statement is, you may be realizing that it’s a hard document to decipher. Never fear: We’re here to help you figure it out. First of all, it’s important to understand that your monthly mortgage payment covers more than the payment on your house. We’ll break down what exactly comes out of the mortgage payment, how your escrow account is used, and what is included in your escrow statement.
What’s In Your Mortgage Payment?
The check you send to the bank each month covers more than your mortgage. It also includes money for real estate taxes and insurance to protect the property. Homeowners insurance is standard for most mortgages and just depends on which Florida homeowners insurance you choose. Depending on your unique situation, you may also choose to include other types of insurance, such as flood insurance. Also included may be mortgage insurance.
How Is Your Escrow Account Used?
When you make your monthly mortgage payment, the bank deducts the amounts for real estate taxes and any insurance premiums and deposits them in the escrow account. They make payments once a year using the proceeds of the escrow account, and then send you a statement. Because they estimate what these payments will be, the actual payment does not usually add up to the estimates exactly. These figures will be recorded on your escrow statement under the headings “prior year projection” or a similar title (the amount they estimated for last year’s payments), and “actual activity” or similar (what you actually paid). If you still owe, this is called a “shortage,” and you can usually either pay that or divide it by 12 and add it to the following year’s payments. If you find a mistake in your escrow statement, you may ask the bank to fix it. They will then issue you a “short statement” to fix the problem, restarting the escrow year.
What About Homeowners Insurance?
Your escrow statement includes the details of account activity throughout the previous year. If you’re ever wondering, “How much is homeowners insurance?” your escrow statement is the place to look to find the amount you’re paying, as well as how much you paid in real estate taxes. If you still need to purchase Florida homeowners insurance, you should compare prices between several independent insurance providers. When it comes to homeowners insurance Florida is just like any other state: the price of the premiums will range depending on when you buy it and the details of your home. You can purchase insurance yourself by filling out a waiver, but many lenders require it, as well as PMI if you have less than 20% equity in the property.
Now that you understand your mortgage payments more fully, hopefully you feel more in control of your finances. Knowing how your escrow account is used and how your statement works is an important aspect of homeownership. But if it takes some time to really nail down your understanding, don’t fret. These are tough concepts, and you may need some additional help. In that case, feel free to speak with a representative at your bank or talk to an insurance agent who may be able to help you figure it out.
As a homeowner, new or old, safety around your home should be your top priority. Download our FREE Home Safety Tip Sheet to learn a few easy tips that will help you keep your home safe while you’re away!

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