You may have heard the term before or maybe you have not. If you are one of the many people who are just starting out in the home buying process this term may be unfamiliar to you. Making sure you are familiar with different mortgage terms and how they work will ensure a stress-free process. Let’s cover the basics of escrow…
What is Escrow?
Think of escrow as a holding tank, or a reservoir, for all the necessary documents and deposits you may need during your home buying process. When you first begin the real estate transaction an escrow account is set up. This account is usually managed by the title company or a lawyer and they will hold all the important documents and deposits while the buyer and seller work out all the necessary details.
How does it work?
After you have found the home of your dreams, it is time to dive into the paperwork portion of the home buying process. This is where the escrow account comes into play. Usually managed by an escrow officer, they will make sure that all the important documents are provided to the necessary people and that everyone gets paid what they are owed. After you close on your new home, the escrow officer will make sure to record the deed and title transfer which will then make the home officially yours! (Congrats!)
Within most transactions there is usually a second type of escrow account that will be set up between you and your lender. This account is where money will be held to pay property taxes and insurance. Each month you will pay a portion of your estimated annual costs as well as principal and interest. At the end of the year your lender will adjust your monthly escrow account based on […]