Escrow Shortage
An escrow shortage occurs when your escrow account does not have enough funds to cover the upcoming property tax and insurance payments, typically due to increases in those costs.
When a shortage is identified during your annual escrow analysis, the servicer will adjust your monthly payment to cover the shortfall. You may be given the option to pay the shortage as a lump sum or spread it over the next 12 months.
An escrow shortage is not a mistake or a penalty. It is a natural result of rising property taxes or insurance premiums. It does not affect your interest rate or loan terms.
Why This Matters: Escrow shortages are one of the most common reasons borrowers see an unexpected increase in their monthly payment. Knowing how they work — and how to respond — keeps you in control of your budget.
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