"Can I Skip the Escrow Account and Pay My Own Taxes and Insurance?"

On most conventional loans you can ask, and your lender decides under a written policy it is required to keep. On an FHA loan the escrow account is required by federal regulation. On any loan, the account cannot be waived for monthly mortgage insurance. Where a waiver is allowed, it usually carries a small pricing cost, and the lender is looking at more than your down payment.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, NMLS #483943, through C2 Financial Corporation. The rules behind this question are published by Fannie Mae, by Freddie Mac and by HUD, and they are linked below so you can read them yourself.

What are you asking for when you ask to waive escrow?

You are asking to pay the property tax bill and the homeowner's insurance renewal yourself, directly, instead of sending one-twelfth of each to the servicer every month and having the servicer pay them for you. How an escrow account works covers the account itself, the cushion and the annual analysis, and none of that changes here.

Two responsibilities move over to you when a waiver is granted. The county tax bill becomes yours to watch for and pay on time, and the insurance renewal becomes yours to keep current. Each one has its own due date, and once the account is gone your servicer is not sending you a reminder about either of them.

Your taxes and your insurance cost the same amount either way, so waiving the account does not save you money. What it does is let you hold that money yourself until each bill comes due, which works out well if you still have it on hand when the county and the insurance carrier want it.

Which loans is the answer already no on?

Three of these are settled before anybody looks at your file, so they are worth knowing first.

Monthly mortgage insurance. Fannie Mae Selling Guide B2-1.5-04, revised 04/01/2020 says that escrow deposits for the payment of mortgage insurance premiums you are the one paying for are mandatory, and that lenders cannot waive an escrow account for those premiums. Freddie Mac Single-Family Seller/Servicer Guide Section 4201.15, revised 08/05/2026 says the same thing in its own words. Freddie calls the lender that sells it a loan the Seller, and it does not let that lender waive the escrow requirement on the collection of mortgage insurance you pay for. So if you are putting less than 20 percent down on a conventional loan and paying mortgage insurance monthly, that piece is escrowed no matter what the rest of the file looks like.

Certain refinances that roll unpaid real estate taxes into the new loan. Fannie's B2-1.5-04 says that for certain refinance transactions where you are financing real estate taxes in the loan amount, an escrow account is required, subject to applicable laws or regulations, and that lenders cannot waive the account on those. If the new loan is what paid off the old tax bill, the lender wants the next one collected month by month.

Anywhere state or federal law requires the account. Freddie's 4201.15 names this directly, alongside the mortgage insurance carve-out. Fannie's waiver language begins with the words "unless required by law." A requirement written into your state's law is not something a lender can agree around, so this one varies by where the property is.

FHA loans are their own answer. The escrow account is built into the mortgage instrument itself. 24 CFR 203.23 requires the mortgage to provide for payments held by the mortgagee for the purpose of paying ground rents, taxes, assessments and insurance premiums before they become delinquent, held in escrow subject to 24 CFR 203.550. There is no waiver to ask about on an FHA file. How an FHA loan works covers the rest of the program, and this is one of the trade-offs that comes with it.

Who decides whether you can waive, and what are they looking at?

On a conventional loan, the lender decides, and both agencies tell the lender how that decision has to be made.

Fannie's B2-1.5-04 says that unless required by law, lenders may waive escrow account requirements for an individual first mortgage, provided the standard escrow provision remains in the loan documents. Then it says what the lender has to do about it. Lenders must have a written policy governing the circumstances under which escrow accounts may be waived. That policy has to provide that a waiver is not based solely on the loan-to-value ratio of the loan. It also has to weigh whether you can handle the lump sum payments of taxes, insurance and the other items the account would have covered. A large down payment is part of the picture, and Fannie does not let it be the whole picture.

Freddie approaches it from the other direction. Section 4201.15 says Freddie Mac does not require escrow accounts except on the mortgage insurance you pay for monthly. A lender that sells Freddie Mac loans without escrow accounts has to establish and maintain a written policy saying when the account is not required. Before that lender waives one, it has to look at whether you can make all the payments as they come due. The Guide names those payments as property hazard insurance premiums, real estate taxes, ground rents and other charges that are or may become first liens on the property, and special assessments.

When the escrow requirement is waived, the lender must retain Fannie Mae's right to enforce the requirement in appropriate circumstances, and the standard escrow provision stays in your loan documents either way. So the escrow language never actually leaves your note and your security instrument. You are being given permission to pay the two bills yourself, and under the right circumstances the lender is still allowed to start collecting them again.

Does a condo or a planned unit development change the answer?

It changes the insurance half of it.

Fannie's B2-1.5-04 says Fannie Mae does not require an escrow deposit for property or flood insurance premiums on an individual unit in a condo, a co-op or a PUD. A PUD is a planned unit development, which is a neighborhood where an association owns and maintains the common areas. The exception applies when the project is covered by a blanket insurance policy the homeowners' association or the co-op corporation purchases. Your association is already buying that coverage and you are already paying for it inside your dues, so there is nothing for the servicer to collect a second time.

Property taxes on the unit are still yours and still assessed to you, so the tax side of the account is unaffected. How a condo project gets reviewed for a mortgage covers what else the association's insurance has to look like before the loan can be made.

What usually goes wrong

Assuming a 20 percent down payment settles it. Fannie requires the lender's written policy to look past the loan-to-value ratio at whether you can handle the lump sums, and Freddie tells its own lenders to look at the same thing. A strong down payment helps, and it does not decide the question by itself.

Asking after the rate is locked. Whether the loan carries an escrow account is priced into the quote, so the question belongs in the same conversation as the rate. Asking afterward usually means repricing. What moves your rate covers the other adjustments that live in the same place.

Expecting the waiver to carry over to the next loan. Each mortgage is its own decision under the rules that apply to that loan, so a waiver on your current loan is not a promise about a refinance later.

Losing track of the first tax bill. The county sets its own billing and due dates, and a purchase in the middle of a tax year can put the first full bill further out than you expect. What happens to your property taxes after you buy walks through the timing, and when your first mortgage payment is due covers the other date that lands in the first month after closing.

Letting the insurance renewal slip. An insurance policy that lapses can be replaced by coverage the lender buys on your behalf, which costs considerably more and protects the lender's interest rather than your belongings. So the renewal date is worth putting on your own calendar the week the policy is written.

An illustration, so the cash flow is clear

The numbers below are made up to show the mechanism. This is not a real file and it is not a prediction about your loan.

A home closes in April. The annual property tax bill runs $4,800 and the homeowner's insurance premium runs $2,400, which is $7,200 a year between them, or $600 a month.

With an escrow account, $600 goes out with every mortgage payment, the servicer holds it, and the servicer pays the county and the insurance carrier when each one comes due. You are not tracking either due date.

With a waiver, that $600 stays with you each month, and you owe the same $7,200 across the year on the county's schedule and the carrier's schedule rather than your own. If the county bills the full amount once in November, you need $4,800 available that month, and the insurance renewal is a separate date with its own amount. Across twelve months you spent the same money, and you were the one holding it against two large due dates you did not set.

Most people who do this well end up moving $600 into a separate account every month, which is the same thing the servicer would have been doing. If that money gets spent along the way, November is the month it shows up.

Where to start

You'll want the financing side priced before this comes up, because the escrow question is inside the quote rather than next to it. You can see pricing for your own scenario with no credit pull, no account and nobody calling you afterward. You will see several options on one sheet, and you can choose the option that works best for you. That selection can change as the file comes together.

When you are ready to ask about a waiver, the useful version of the question is whether one is available on the program you are choosing and what it does to the pricing on that sheet. Why a closing cost estimate changes from one lender to the next covers the rest of what moves between two quotes. No letter from anyone is a loan commitment. Final approval depends on the property, the appraisal and full underwriting.

Common questions

Can I waive escrow if I put 20 percent down?

Sometimes, and the down payment alone is not what decides it. Fannie Mae Selling Guide B2-1.5-04 requires every lender that permits escrow waivers to keep a written policy, and it requires that policy to provide that a waiver not be based solely on the loan-to-value ratio of the loan. The policy also has to weigh whether you can handle the lump sum payments of taxes and insurance. Freddie Mac Guide Section 4201.15 requires its own lenders to keep a similar written policy and to look at the same ability to pay. Your down payment is one of the things a lender weighs under those published rules.

Can you waive the escrow account on an FHA loan?

No. On an FHA-insured mortgage the escrow account is part of the mortgage instrument. 24 CFR 203.23 requires the mortgage to provide that payments are held by the mortgagee for paying ground rents, taxes, assessments and insurance premiums before they become delinquent, in an escrow account subject to 24 CFR 203.550. The account also collects the mortgage insurance premium. There is no waiver option to ask about, so this is one of the trade-offs to weigh while you are still choosing a program.

Does waiving escrow change your interest rate?

Usually it affects the pricing on the loan in some form, either in the rate or in the fees, because a loan without an escrow account carries slightly more risk to the lender. The amount varies by program and by lender, and it moves, so the way to settle it is to ask for the same scenario priced both ways and compare the two sheets. That is a question to raise before a rate is locked rather than after.

Can I have the escrow account removed later, after closing?

That becomes a servicing question rather than an origination one, and it is governed by your loan documents and by the rules that apply to your loan. The standard escrow provision stays in the loan documents even when a waiver is granted at closing, and Fannie Mae's guidance requires the lender to retain Fannie Mae's right to enforce the escrow requirement in appropriate circumstances. So the practical path is to ask your servicer in writing what their policy is on your specific loan, rather than assuming it can be dropped on request.

Is an escrow account required on a condo?

Not for the insurance covered by the association. Fannie Mae Selling Guide B2-1.5-04 says Fannie Mae does not require an escrow deposit for property or flood insurance premiums on an individual unit in a condo, co-op or PUD project. The condition is that the project is covered by a blanket insurance policy the homeowners' association or the co-op corporation purchases. Property taxes assessed on your unit are separate and are still part of the escrow question. If you are paying monthly mortgage insurance on the loan, that piece is escrowed regardless.

What does a lender look at when deciding on an escrow waiver?

Two things, under a written policy the lender is required to maintain. Fannie Mae Selling Guide B2-1.5-04 names the loan-to-value ratio and your ability to handle the lump sum payments of taxes, insurance and the other items the account would cover. It specifically bars a policy that rests on the loan-to-value ratio alone. Freddie Mac Guide Section 4201.15 tells its own lenders to look at whether you can make all the payments as they come due. The Guide names those payments as hazard insurance premiums, real estate taxes, ground rents and other charges that are or may become first liens, and special assessments.