Understanding escrow can make buying or selling your next home much easier. Here's everything you need to know, so you can feel confident when you make your next residential property transaction.
WHAT IS ESCROW?
There are actually two types of Escrow. The first type is a legal arrangement you have with a neutral third party (the title company) when you're buying or selling a piece of property. Earnest Money, a small deposit that shows you’re serious about purchasing a property, is held in an escrow account at the title company, until the property sale closes successfully. This type of Escrow is designed to keep everyone safe during the transaction, and to protect the finances and interests of both of the parties. The second one is used after the property is purchased and is typically set up with your Lender. This type of escrow allows another third party to automatically set aside a portion of your mortgage payment for property taxes and homeowners insurance. Since mortgage companies generally require these to be paid as part of the mortgage payment, the money is held in escrow until they are to be paid to the county and insurance company.
ESCROW IS IMPORTANT
While the idea of letting a third party hold some of your money might sound suspicious and a little worrisome, it's very common for property transactions. By working with a trusted title and mortgage company, you can feel confident that your money is being held safely and securely and will be available for you when you need it most.