Unlocking the door to your new home never sounded so good. It took time, work, and a lot of long days before you heard the key tumbler turning. Let’s talk about a topic most of us have heard about, but some may not know its meaning.
Escrow, just what is it? Escrow is a contractual arrangement where a third party holds funds or property until a specific condition is met (such as the fulfillment of a purchase agreement). It plays a significant role in real estate throughout the home-buying process, and it is utilized in real estate transactions to protect both the buyer and the seller.
An escrow account will keep the money for taxes and homeowner’s insurance throughout the duration of the mortgage. This account serves two purposes to safeguard the buyer’s Earnest money (good faith deposit), ensure that the money is dispersed in accordance with the terms of the sale, and also to keep a homeowner’s money set aside for house insurance and property taxes.
There are two different types of escrow accounts because of their various functions. While the other is utilized throughout the course of your loan, one is used during the house buying process. An escrow account will be established to keep the deposit in order to safeguard both the buyer and the seller. The earnest deposit will remain in the escrow account until the deal is finished. The down payment is then covered by the money.
Occasionally, money is kept in escrow after the house has been sold. Escrow holdbacks are what this is known as. There are several situations where an escrow holdback is necessary. Maybe you agreed to let the seller occupy the property for an extra month, or maybe you discovered a problem with the house during the final walkthrough.
Your lender will set up an escrow account to pay for your taxes and insurance when you buy a house. After closing, your mortgage servicer deducts a portion of each monthly payment and places it in an escrow account until the time comes for you to make your tax and insurance payments.
Escrow may be handled by a mortgage servicing business or agent when you’re buying a house. Sometimes the escrow agent or business is the same as the title business. The escrow business may also oversee keeping the deed and other papers relating to the sale of the house in addition to managing the buyer’s deposit.
Escrow is a crucial component of home buying. It provides a practical way to pay your taxes and insurance while protecting buyers and sellers during real estate transactions.
Escrow accounts are sometimes necessary and other times not. Your financial profile and the type of loan you receive will determine this. The absence of an escrow account may be tempting since it could result in a lower monthly mortgage payment but having an escrow can give you peace of mind by making sure those crucial expenses are paid.
For any questions contact Responsible Broker/Owner Buddy Rangel at Homestead Realty
307-921-8842 or stop by our office located at 336 Red Canyon Rd, Thermopolis, Wy.