The Illinois Escrow Account Disclosure Agreement: What You Need to Know
If you`re in the market for a home in Illinois, you`ll likely encounter the term “escrow” during the buying process. An escrow account is a separate account that is established by your lender to hold funds for certain expenses related to your mortgage, such as property taxes and homeowner`s insurance.
To ensure that borrowers in Illinois are fully informed about their escrow accounts, the state requires lenders to provide an Escrow Account Disclosure Agreement (EADA). Let`s take a closer look at what this document entails and why it`s important.
What is the Illinois Escrow Account Disclosure Agreement?
The EADA is a legal document that outlines the terms of your escrow account. It includes information such as the estimated amount of money that will be in your escrow account at the time of closing, the frequency of escrow account payments, and how funds will be disbursed from your account.
The EADA also outlines your responsibilities as a borrower, such as ensuring that there is sufficient money in your escrow account to cover expenses and notifying your lender of any changes in your insurance coverage.
Why is the EADA important?
The EADA is an important document for several reasons. First, it helps borrowers better understand the escrow process and what expenses will be covered by their account. It can also help borrowers budget for these expenses, since they`ll know how much money will be deposited into the account each month.
Second, the EADA helps ensure that borrowers are protected from unexpected expenses. For example, if property taxes increase, your lender may not have enough money in your escrow account to cover the higher expense. If this happens, your lender may ask you to pay the difference. However, if the increase was not disclosed in the EADA, you may have grounds to dispute the charges.
Lastly, the EADA can help prevent misunderstandings between borrowers and lenders. By outlining the terms of the escrow account in writing, both parties can refer to the document if questions or disputes arise.
What should you look for in the EADA?
When reviewing your EADA, there are several key pieces of information to look for:
– The estimated balance of your escrow account at the time of closing
– The monthly payment amount that will be deposited into your escrow account
– The frequency of escrow account payments (typically monthly, bi-annually or annually)
– The expenses that will be paid from your account (such as property taxes and homeowner`s insurance)
– Your responsibilities as a borrower, such as maintaining adequate funds in the account and notifying your lender of changes in your insurance coverage
If you have any questions or concerns about the EADA, don`t hesitate to ask your lender for clarification. It`s important to fully understand the terms of your escrow account in order to avoid any surprises down the road.
In conclusion, the Illinois Escrow Account Disclosure Agreement is an important document that provides borrowers with valuable information about their escrow accounts. By reviewing this document carefully and asking questions if necessary, you can ensure that you`re fully informed about the terms of your mortgage.