I'm buying a home and can't afford to pay a full year of homeowner's insurance. What are my payment options?

You're definitely not the only one! Talk to your mortgage lender about using an escrow account for your home insurance. That way your monthly mortgage payment will be adjusted to include your home insurance premium. When your next premium is due, your lender will pay it using the money in your escrow account.

Here's an example. Let's say your home insurance is $600 a year. That works out to $50 a month, so the amount you send to the mortgage company each month would be increased by $50. Each month, that $50 would be deposited into your escrow account. When the bill comes due, your lender will send a payment from your escrow money.

It's so common to include escrow that the industry has come up with an acronym to describe how the mortgage payment breaks down:<br /><br /><b>P</b>rincipal on the mortgage<br /><b>I</b>nterest on the mortgage<br /><b>T</b>axes held in escrow<br /><b>I</b>nsurance held in escrow

Even so, it's important to talk to your lender about the escrow before you close on the house. (And remember, this is different from the escrow for closing costs.) For one thing, you need to make sure you'll have an escrow account. (They're common, but not everyone has one.) You might also want to ask whether there's a minimum balance for escrow accounts, how your monthly payment will be adjusted if your insurance rate changes in the future, and whether your property taxes can also be included in your escrow payment.