First and foremost, setting money aside for property taxes when buying a new home is crucial to avoid being blindsided by a massive tax bill later on. One way to do this is by setting money aside in addition to your normal escrow payments. Here's what you need to know about mortgage escrow accounts:

• Mortgage escrow accounts are often required if you make a down payment of less than 20% on a conventional loan, and they are mandatory for FHA, VA, and USDA loans.
• Even if not required, some homeowners choose to maintain an escrow account for convenience and peace of mind.
• The primary purpose of a mortgage escrow account is to ensure timely payment of property-related bills like taxes and insurance by breaking down these larger expenses into manageable monthly payments.
• A portion of your monthly mortgage payment goes into the escrow account, which your lender then uses to pay property taxes and insurance premiums.

It's essential to understand how escrow works to manage your homeownership expenses effectively. Escrow accounts often undergo annual analyses by lenders to adjust funds and payments accordingly. If there is a shortage in the account, you may face a sudden increase in property taxes and mortgage payments.

For new construction homes, lenders may not collect enough upfront to cover the accurate property taxes, potentially leading to significant bills later on. It's crucial to be cautious and ensure you are adequately prepared financially to cover the true tax liability without getting caught off guard. Beware of the consequences of new home property tax increases, which could result in substantial financial burdens if not planned for accordingly.