Finance
What is the purpose of an escrow account (impound account) maintained by a Connecticut mortgage servicer?
ATo hold the down payment until closing
BTo collect and pay property taxes and insurance on behalf of the borrower✓ Correct
CTo hold earnest money during contract contingencies
DTo fund property improvements required by the lender
Explanation
A mortgage servicer's escrow (impound) account collects monthly amounts from the borrower to ensure property taxes and homeowners insurance are paid when due, protecting both borrower and lender.
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Key Terms to Know
Earnest Money
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
EscrowA neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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