Which entity typically requires escrows in a conventional mortgage?

In a conventional mortgage, the lender typically requires escrows as a way to ensure that funds are available for specific expenses related to the property, such as property taxes and homeowners insurance. By establishing an escrow account, the lender can collect a portion of these expenses each month as part of the borrower's mortgage payment and hold the funds until they are due. This practice helps reduce the risk to the lender, as it ensures that important expenses are paid on time, thereby protecting their investment in the property.

Additionally, having an escrow account can provide peace of mind for borrowers, as they do not have to worry about making separate payments for these large, periodic expenses. They know that the money is being set aside for these costs.

The other options do not typically involve the requirement of escrows. While a borrower may express a preference for having escrows due to convenience or budget management, it is ultimately the lender who mandates their establishment to mitigate financial risk. Real estate agents and insurance companies are not involved in the financial management of the mortgage in this way.