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What is an escrow cushion?

cushion escrow
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What is an escrow cushion?

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An escrow cushion is used to offset any shortages your escrow account may incur due to increases in your property taxes or homeowner’s insurance. The allowable cushion is equal to two monthly escrow deposits unless otherwise required by state law.

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An escrow cushion is used to offset any shortages your escrow account may incur due to increases in your property taxes or homeowner’s insurance. The allowable cushion is equal to two monthly escrow deposits unless otherwise required by state law.

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An Escrow Cushion is the amount of money needed to cover your escrow payments for a number of months – the minimum amount of money to be kept at all times. This amount is determined by the laws of the state your property is located.

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The cushion is funds paid into the escrow account to cover unanticipated disbursements or increases in disbursements due to rate increases, higher assessments or other factors. Section 10 of the Real Estate Settlement Procedures Act (RESPA) allows lenders to collect and maintain up to one-sixth (2 months) of your total disbursements in your escrow account at all times, unless otherwise specified by your mortgage document or state law.

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