Ever wonder why your mortgage payment in South Lubbock includes more than principal and interest? That extra amount is your escrow for property taxes and insurance. It can feel confusing, especially when your payment changes in year two. You want clarity so you can budget with confidence and avoid surprises.
In this guide, you’ll learn how escrow works in Texas, what to expect at closing, and why your escrow portion may go up or down. You’ll also get a practical checklist tailored to Lubbock County so you can stay ahead of deadlines and updates. Let’s dive in.
Escrow basics
An escrow account is set up and managed by your mortgage servicer. A portion of your monthly payment goes into this account to cover your property taxes and homeowner’s insurance when they are due. Many lenders require escrow to make sure these important bills are paid on time.
Federal rules under RESPA and Regulation X guide how escrow works. Your servicer must provide an initial escrow statement at or shortly after closing and an annual escrow analysis each year. Servicers can keep a small cushion, often explained as up to two months of escrow payments, to prevent shortages.
If your annual escrow analysis shows a shortage, your servicer will notify you and offer options to pay the difference in a lump sum or spread it over a number of months. If there is a surplus above a small threshold, commonly around 50 dollars, servicers generally refund it.
How Lubbock taxes are set
In Lubbock County, your total property tax bill is made up of several taxing entities. These can include Lubbock County, the City of Lubbock if you live within city limits, your local school district, the hospital district, the community college, and any special districts. Each entity sets its rate annually, and your total bill is your taxable value multiplied by the combined rate.
The Lubbock Central Appraisal District (LCAD) sets your appraised value. If you qualify, filing a homestead exemption with LCAD can reduce your taxable value. That lowers your tax bill and can reduce your escrow needs going forward.
Texas follows a predictable cycle. Appraisal notices are typically mailed in the spring, and there is a set protest period each year. Taxing units adopt rates in the fall, and tax bills are mailed afterward. Payment deadlines and any penalties for late payment are set by state law and administered locally. For current dates and details, check the Lubbock County Tax Assessor-Collector and LCAD calendars.
What to expect at closing
Your Closing Disclosure shows two escrow-related items. First, it shows whether your loan will require an escrow account. Second, it lists an “Initial Escrow Payment at Closing” that funds your new account.
Here is what usually happens:
- Tax proration. The settlement agent will adjust for the seller’s portion of the year’s taxes based on the contract and timing. You will see a credit or debit on the closing statement.
- Initial escrow deposit. Your lender will collect funds to get your escrow started. This often includes the first month’s escrow amount and may include a cushion that federal rules allow.
- Monthly payment setup. The Closing Disclosure shows the estimated monthly escrow portion that will be added to your mortgage payment.
If you are using a government-backed loan such as FHA or VA, escrow is typically required. Some conventional lenders may allow an escrow waiver for qualified borrowers, sometimes for a fee. Ask your lender early so you understand your options.
How the monthly escrow is calculated
Your monthly escrow amount is based on your bills for the next 12 months. Servicers add up projected property taxes, your homeowner’s insurance premium, and any other escrowed items. They divide the total by 12 to get the monthly amount, then apply any allowed cushion.
Expect your monthly escrow portion to change when any of these change:
- Property tax assessments or tax rates adopted by local entities
- Homeowner’s insurance premiums at renewal
- Exemptions, such as adding or removing a homestead
- Prior shortages or surpluses found in the annual analysis
Your servicer’s annual escrow analysis explains the changes and shows your new monthly payment for the next year.
Why your payment changes in year two
It is common for your mortgage payment to change after the first annual escrow analysis. In South Lubbock, school district tax rates are often the largest part of the bill, so changes there can have a noticeable effect. Appraisal changes or an insurance premium increase can also move the needle.
If taxes or insurance go up compared to your original estimate, your escrow account may show a shortage. You will get a notice explaining the amount and your options to handle it. If the analysis shows a surplus above your servicer’s refund threshold, you can expect a refund.
Homestead exemptions and escrow
A homestead exemption reduces the taxable value of your primary residence. If you qualify and file with LCAD, the exemption can lower your tax bill and may reduce your escrow requirement in future analyses. File as soon as you are eligible so the change can be factored into your next tax year.
If you buy midyear without the exemption in place, your first-year escrow could be based on higher projected taxes. Once the exemption is approved and reflected on the tax roll, your servicer will incorporate the lower tax amount at the next annual review.
First-year checklist for South Lubbock buyers
Use this simple checklist to stay on track after closing:
- Confirm escrow setup. If you did not receive your initial escrow statement at closing, ask your servicer for it.
- File homestead exemption. Apply with LCAD promptly if the property is your primary residence and you qualify.
- Keep insurance current. Save your insurance declarations and notify your servicer of any changes, cancellations, or non-renewals.
- Watch your mailbox. Expect your annual escrow analysis. Review it and note any changes to your monthly payment.
Budgeting and planning tips
Escrow works best when you plan for movement. Consider these steps to avoid surprises:
- Build a buffer. Set aside an extra 5 to 10 percent in your monthly budget in case taxes or insurance rise.
- Track local changes. Pay attention to appraisal notices in the spring and any rate discussions by local taxing entities in the fall.
- Review your policy. Shop your homeowner’s insurance at renewal if premiums increase.
- Ask questions early. If your payment changes, contact your servicer to review the analysis and discuss shortage repayment options.
Closing-day documents to review
Before you sign, review these items closely:
- Loan Estimate and Closing Disclosure. Confirm whether escrow is required and the monthly escrow amount.
- Initial escrow payment at closing. Ask the closing agent how it was calculated and what cushion is included.
- Tax proration. Verify the seller and buyer portions match the contract and calendar.
Who to contact for specifics
For property value, exemptions, and protest deadlines, check the LCAD resources. For tax bills, payment due dates, and penalties, contact the Lubbock County Tax Assessor-Collector. For federal escrow rules, review consumer guidance under RESPA and Regulation X from the Consumer Financial Protection Bureau. Your mortgage servicer is your primary contact for your account’s balances, cushions, and timelines.
Ready to make a move in South Lubbock or recalibrate your plan before you buy or sell? Connect with a local team that pairs neighborhood knowledge with hands-on guidance. Reach out to Dane Hensley and the Panhandle Realty Group team for clear, step-by-step help and, if you are selling, get your instant home valuation.
FAQs
What is a mortgage escrow account in Texas?
- An escrow account is a servicer-managed account that collects part of your monthly payment to cover property taxes and homeowner’s insurance when due, following federal rules under RESPA and Regulation X.
Do Lubbock lenders require escrow on all loans?
- Many lenders require escrow, especially on government-backed loans; some conventional loans may allow an escrow waiver for qualified borrowers, sometimes for a fee. Confirm with your lender early.
Why did my Lubbock mortgage payment increase after year one?
- Your servicer’s annual escrow analysis likely adjusted for changes in taxes or insurance, or for a prior shortage, which raises the escrow portion of your monthly payment.
How do homestead exemptions in Lubbock affect escrow?
- A homestead exemption through LCAD reduces taxable value for your primary residence, which can lower your tax bill and reduce your escrow amount in future analyses once processed.
When are Lubbock County property taxes due if I escrow?
- Texas tax bills are generally mailed in the fall, and payment deadlines are set by law; your servicer pays them from escrow. For exact dates, check the Lubbock County Tax Assessor-Collector.
What happens if my escrow has a shortage in Lubbock?
- Your servicer must notify you and offer repayment options, such as a lump sum or spreading the shortage over several months; you can also choose to pay it sooner to limit monthly increases.
