If you’re new to the home-buying process, you may not know what “escrow” is. Escrow refers to something of value (such as an earnest money check or deed) that is being held by an impartial third party. It is used as a measure of protection for both the buyer and the seller to ensure that all monies are delivered as expected and intended.
If a mortgage lender is speaking of escrow, they are referring to the funds needed to cover your homeowner’s insurance and property taxes. Your mortgage lender wants to ensure that these items are paid monthly, and collects this money as part of your mortgage payment and disperses it to the appropriate parties.
Always ask your real estate agent if you’re unclear about the processes of buying or selling your home. Staying informed will ensure a smoother real estate transaction between all parties involved.