We generally like impounds. They turn a couple of large, easy-to-forget annual bills into one smooth monthly amount. Impounding (also called escrowing) means your property taxes and homeowners insurance are folded into your monthly mortgage payment, and the servicer pays those bills when they come due. One of us impounds his own taxes and insurance for exactly this reason: nothing sneaks up on you. The tradeoff is that the money sits with the servicer earning you nothing while it waits. Whether you even get a choice depends on the loan: - FHA requires an escrow account for taxes, insurance, and mortgage insurance no matter how much you put down. USDA requires one for taxes and insurance too. - VA has no program rule requiring escrow, but most VA lenders require it anyway. - Conventional loans generally require escrow when the loan is over 80 percent of the home's value, meaning less than 20 percent down. Below that line, waiving is a lender-by-lender call, commonly available once you are past 10 percent down. If you are disciplined about setting money aside and want the funds in your own account until the bills come due, waiving escrow where allowed can make sense. If you would rather not think about it, impounding is the simpler path. This one comes down to how you prefer to manage cash flow, and either choice is a fine one when you make it on purpose.