Annual taxes on the home Celinda Evans is purchasing are $1,200 (or $100 per month), due on April 30. Celinda's closing on her new home will occur on July 15, and her first full mortgage payment will be made on September 1. Under RESPA, the maximum deposit Celinda's lender can require for her taxes is:

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Under the Real Estate Settlement Procedures Act (RESPA), lenders can require borrowers to deposit into an escrow account at closing a maximum of two months' worth of payments for taxes, insurance, etc., as a cushion. Since Celinda's annual taxes are $1,200, or $100 per month, the maximum deposit her lender can require for her taxes is 2 months * $100 = $200. However, since taxes are due on April 30 and her first mortgage payment isn't until September 1, the lender might also require her to pay the prorated amount of taxes from the date of closing (July 15) to the end of the tax period (April 30 of the next year), which would be more than the initial two months' cushion. But the question specifically asks about the maximum deposit for the escrow account under RESPA, which is limited to two months' worth of payments, making the correct answer $200, not $600. My previous response contained an error in interpreting the question's focus on the RESPA limit for an escrow account deposit.

Annual Taxes on the Home Celinda Evans Is Purchasing Are