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Notary Loan Signing Agent Training: What is an Escrow Account, Impound Account, and PITI?

2/23/2018

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By Mark Wills - Course Instructor of the Loan Signing System and Forbes Real Estate Council Member
Hi, I’m Mark and I teach the Loan Signing System.

When you’re doing a loan signing, the borrower may have questions about their impound account.

In this blog, you’ll learn the basics of what an impound account is.
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First and foremost, an impound account and an escrow account are the exact same thing. One can say that their taxes and insurance are impounded. Or they can say they have an escrow account for their taxes and insurance. 

So what is an escrow account or impound account?  Before I can answer that, it’s important to understand how property taxes and homeowners insurance are billed. 

Let's start with taxes. Every homeowner in America has to pay property taxes so the municipality can pay for local, roads schools, fire departments etc.

Property taxes are due twice a year and the homeowner is the required to pay based off a percentage of the value of their home. So let’s just say that property taxes are 1.2% of home value and the home value is $100,000. There would be a $1,200 tax bill due for that year.


The important thing to note is that the tax bill typically is due twice a year. So you would have two payments of $600 each year. 

And there are some people that will save $100 per month on their own and pay the tax bill twice a year.

Same with homeowners insurance, or also know as fire or hazard insurance. The lender wants to make sure that the home they are lending against is insured in case of a fire or any other type of damage so that their investment is protected. No different than why you insure your car, except homeowners insurance premium is usually due once a year. 

And just like the tax bill, some people will save for the insurance bill pay the annual premium when it comes due.


Pretty simple, right?

However, some people don't like to put aside money on their own for bills that are due once or twice a year. 

And that is how an impound account or escrow account came to be. The bank created a simple way for the borrower to give them the money that is due for taxes and insurance. And when the tax bill or insurance bill is due, the bank will actually pay the tax bill and insurance bill on the borrower’s behalf.
So, the easiest way to understand an escrow account is that it is simply a savings account for taxes and insurance. That's it. 

So how does the bank determine how much is set aside each month in the impound account and how much a borrower’s monthly payment will be? 


It's easy. Essentially, they take the annual estimated tax bill and annual insurance premium and divide it by the 12 months that are in a year. Then they add that amount to the principal and interest payment, and that is the total amount the borrower owes the bank every month. The monthly payment will include principal, interest, taxes and insurance, or also know as PITI. 

So in our previous example, property taxes are $1200 a year, divided by 12 is $100 per month.

Then let's say homeowners insurance is $600 a year, divided by 12 and that is $50 dollars a month. 

So the bank would add $150 to the principal and interest payment to get their TOTAL monthly payment. 


During a loan signing, the Note will include the principal and interest part of the payment and generally will not include taxes and insurance. However, the Payment Letter will include principal, interest, taxes and insurance, or PITI. 

This is why in my Loan Signing System, I recommend pulling both the Note and the Payment Letter to the front of the loan docs in your signing since this is one of the two things that borrowers want to confirm.

And now you know what an escrow and impound account is. 


Subscribe to my YouTube channel and blog at loansigningsystem.com to get weekly tips and strategies so you can make even more money as a loan signing agent!

​
And when you’re ready to become a top loan signing agent, get my loan signing system course to learn how to do a perfect loan signing and get even more loan signings!
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About the Loan Signing System Course and Certification: The Loan Signing System is a step-by-step bootcamp style online video course that will teach you how to become an expert loan signing agent so you can make money on your own schedule. 
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    About the Author

    Mark Wills is the course instructor of the top rated Loan Signing System agent training course. He has been an active professional loan signing agent for nearly 20 years and owns a loan signing service that does thousands of signings a year.

    Loan Signing System is the Nation's premier notary public loan signing agent training course and is the only signing agent course that is an education partner of the American Escrow Association! 

    Mark is a Forbes Real Estate Council member. ​

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© 2016-2021 Loan Signing System, LLC. All rights reserved.  Loan Signing System is a comprehensive step-by-step course created to help notary publics become expert loan signing agents. Loan signing agents can make $75-$200 per appointment and an appointment for a well trained loan signing agent can take about an hour. 

Loan Signing System seeks to provide relevant training to help loan signing agents learn how to complete a loan signing, how to get more loan signing jobs / appointments, and how to build a loan signing service. This training is not intended as legal advice or state / federal notary public training. ​Check with your state to be sure that loan signing agents are utilized in the closing process. Always follow your state's notary laws and best practices. Unless explicitly stated, Loan Signing System is not sponsored by, endorsed by, or affiliated with any company referenced herein. No guarantees, promises, or warranties of any kind are being made or should be understood to be made. Results may vary. ​Our courses come with a 100% money-back guarantee. 
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  • Homepage
  • FREE RESOURCES
    • Get FREE Training
    • 9 Reasons to Be a Signing Agent
    • Is This Right For You?
    • Lowest Home Mortgage Rates in History
    • FREE NNA 2020 Conference Training - Make More Money As A Notary Signing Agent
    • How To Become a Successful Signing Agent in 9 Steps
    • How to Become a Notary Public
    • How to Make More Money This Year
    • Avoid Common Signing Agent Mistakes
    • Snapdocs Interview
  • Training Courses
    • Compare Signing Agent Courses
    • Get the Six Figure Course
    • Next Level Notary
  • Conference
    • National LSS Conference
  • Testimonials
    • Student Testimonials
    • Signing Agent Interviews
  • Blog and More!
    • Blog
    • Income Calculator Tool
    • How to Avoid Getting Sick
    • How a Bad Economy Affects Notary Signing Agents
    • How A Real Estate Agent Can Make Money During a Recession
    • Get the Best Selling Book
    • How to Set Up a Mobile Office
    • Client Gift Guide
    • How to Print Legal and Letter Size Paper for Loan Signings
    • Bigger Pockets Real Estate Podcast >
      • Side Hustle Nation Podcast - Brian Schooley >
        • Side Hustle Nation Podcast
      • spi
  • Student Login
  • Student Survey