On conventional FHA and VA loans most lenders require that the borrower establish an escrow account. The property taxes, homeowner’s insurance and mortgage insurance are then paid from the escrow account. The escrow account is typically setup a closing by the lender estimating the yearly amounts for property taxes and homeowner’s insurance and then dividing the amount into 12 equal monthly payments. The lender generally collects 2 to 3 months of homeowner’s insurance and several months of property taxes at closing. These are the initial deposits into the escrow account. The lender is allowed to keep a reserve of up to 2 months of taxes and insurance in case of any increases and the lender is required to review the account annually and refund any surplus to the borrower. Many lenders will waive the escrow account requirement if a borrower makes a down payment of 20% or more.