An escrow (impound) account folds your property taxes and homeowners insurance into the monthly payment, and for most buyers it is the better default. Instead of paying taxes and insurance in big lump sums when they come due, the lender adds one-twelfth of the annual total to each monthly payment, holds the money, and pays those bills for you. Your payment becomes principal, interest, taxes, and insurance together (PITI), plus mortgage insurance if you have it. Whether an escrow account is required depends on the loan: - FHA requires escrows for taxes, insurance, and the mortgage insurance premium regardless of down payment. USDA requires them for taxes and insurance as well. - VA has no program-wide mandate; individual lenders typically decide. - Conventional loans generally require escrows when the loan-to-value is above 80% (less than 20% down). Waiving them is typically a lender-by-lender option, usually with more equity and sometimes a small pricing adjustment. - Separate federal rules force escrows on higher-priced loans regardless of program. For most buyers, impounding is the better choice. Two large annual bills become smooth monthly amounts, there is no surprise tax or insurance bill you forgot to set aside for, and it is one less thing to manage. The trade-offs are real: the lender holds that money and usually pays you no interest on it, and once a year the account gets re-analyzed, so if taxes or insurance rise, your payment can climb and you may owe a shortage. If you are a disciplined saver with real equity, self-managing and keeping the cash working for you is defensible. If you would rather never think about it, impound. Either way, your Loan Estimate shows exactly what the escrow setup and monthly figure will be before you commit.