If the borrower's loan includes impounds, the closing statement shows 14 months' insurance.

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Multiple Choice

If the borrower's loan includes impounds, the closing statement shows 14 months' insurance.

When a loan includes impounds (an escrow account) for taxes and insurance, the closing statement is prepared to fund the account for the near term. Homeowners insurance is an annual premium, so the escrow is funded to cover the upcoming year. In addition, lenders commonly require a cushion in the escrow—typically two months—to protect against timing gaps or shortages in payments after closing. So the closing statement shows twelve months for the upcoming insurance year plus a two-month cushion, totaling fourteen months. That’s why fourteen months appears on the statement when impounds are involved. The other month counts don’t align with the standard cushion practice.

When a loan includes impounds (an escrow account) for taxes and insurance, the closing statement is prepared to fund the account for the near term. Homeowners insurance is an annual premium, so the escrow is funded to cover the upcoming year. In addition, lenders commonly require a cushion in the escrow—typically two months—to protect against timing gaps or shortages in payments after closing.

So the closing statement shows twelve months for the upcoming insurance year plus a two-month cushion, totaling fourteen months. That’s why fourteen months appears on the statement when impounds are involved. The other month counts don’t align with the standard cushion practice.

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