FHA Loan Borrowers and Escrow Requirements
The FHA requires that all FHA 203b loan borrowers have escrow accounts. If you have a 203b loan, your lender will open and manage an escrow account for you. This account will hold your monthly contributions for essential expenses. These include property taxes, homeowner’s insurance, FHA MIP, and other costs. The lender will include these costs in your monthly mortgage payment, deposit the funds in the escrow account, and pay these expenses for you when they are due.
This escrow account is different than the escrow account that is used during loan closing. A closing escrow account is operated by a third party (i.e. not the borrower, seller, or lender) and holds important information, such as closing documents, any earnest money deposits you have put down to demonstrate your good faith in the deal, and, right before closing, the funds necessary to buy your home.