Waiving Escrow

Sometimes. On a conventional loan, a lender may agree to waive the escrow account so you pay property taxes and homeowners insurance yourself, but it is not automatic, it depends on the lender's written policy and the loan, and some loans cannot waive escrow at all. FHA loans are set up to collect taxes and insurance in the payment. Higher-priced mortgage loans must have escrow for at least the first five years under federal rules, and flood insurance on a home in a high-risk flood zone generally stays escrowed. In Texas, where property taxes are a large part of the payment, waiving escrow means you have to save for those bills yourself.

What an escrow waiver changes

With an escrow account, your monthly payment includes one-twelfth of the expected tax and insurance bills, and the servicer pays them. With a waiver, your monthly payment is principal and interest, plus any mortgage insurance, and you pay the tax office and the insurer directly when the bills come due. The cost does not shrink. The calendar changes.

The rules by layer

• Fannie Mae. Unless required by law, lenders may waive escrow requirements for an individual first mortgage if the standard escrow provision stays in the loan documents. Lenders cannot waive escrow for the payment of borrower-purchased mortgage insurance premiums or for certain refinances where taxes are financed into the loan. A lender that permits waivers must have a written policy, and the waiver cannot be based only on loan-to-value; it must also consider whether you can handle lump-sum tax and insurance payments (Fannie Mae B2-1.5-04).
• Federal higher-priced loan rule. A first-lien higher-priced mortgage loan must have an escrow account for property taxes and required insurance for at least five years, with limited exceptions (12 CFR 1026.35(b)).
• Flood insurance. For a home in a Special Flood Hazard Area, federal law generally requires regulated lenders to escrow flood premiums, with limited exceptions (42 U.S.C. 4012a).
• Government loans. FHA, VA and USDA loans generally collect taxes and insurance in escrow. Ask me about your specific loan before assuming a waiver is available.
• Lender and investor. Lenders that allow waivers often look at equity, occupancy and credit, and may charge a fee or a pricing adjustment. That cost belongs in your comparison. This article does not invent the charge.

The Texas property tax question

Texas has no state income tax, and local property taxes carry much of the load. A full year of property taxes in Tarrant County is a large single bill, usually due by January 31 of the following year. Homeowners insurance renewals in North Texas can also move sharply after storm seasons. If you waive escrow, you need a separate savings plan for both. See Texas property taxes.

Fictional example

Fictional example: a conventional buyer with a large down payment asks to waive escrow so the monthly payment looks smaller. The loan officer shows two versions: the payment with escrow, and the payment without escrow plus a list of the annual tax and insurance bills the buyer would pay alone, with their due dates. The buyer also learns whether the investor charges for the waiver. With both versions side by side, the buyer decides to keep escrow for the first year and revisit it later.

Common mistakes

• Thinking a waiver lowers the cost of owning the home. It only changes who writes the check.
• Waiving escrow because of one escrow shortage. A shortage means the bill changed. Waiving escrow does not change the bill.
• Confusing a waived escrow with a seller tax proration. One lasts for the loan. The other is a one-time split at closing.
• Assuming the servicer profits from holding escrow. Federal rules limit the cushion to one-sixth of annual disbursements (12 CFR 1024.17).

Questions to ask before you request a waiver

• Does my loan type allow it, and is there a fee or pricing adjustment?
• Is my home in a flood zone that keeps flood escrow in place?
• Can I reinstate escrow later if I change my mind?
• When are my tax and insurance bills due each year?

Next step

If you want to see your payment with and without escrow, including any cost to waive it, I can price both. Book a call, or start an application.

Related questions

• Escrow accounts
• The annual escrow analysis
• Texas property taxes

Sources

Links checked Oct 21, 2026.

• Fannie Mae Selling Guide, B2-1.5-04 Escrow Accounts (topic dated Apr 1, 2020; Guide retrieved Oct 21, 2026): https://selling-guide.fanniemae.com/sel/b2-1.5-04/escrow-accounts
• CFPB Regulation Z, 12 CFR 1026.35 Requirements for higher-priced mortgage loans (current text): https://www.consumerfinance.gov/rules-policy/regulations/1026/35/
• 42 U.S.C. 4012a, Flood insurance purchase and compliance requirements (current U.S. Code): https://www.law.cornell.edu/uscode/text/42/4012a
• CFPB Regulation X, 12 CFR 1024.17 Escrow accounts (current text): https://www.consumerfinance.gov/rules-policy/regulations/1024/17/

About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.

Equal Housing Opportunity.

Last reviewed: Oct 2026

‍