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When you hear the term "escrow" in relation to a house, it refers to a financial arrangement where a third party holds and regulates payment of the funds during the house-buying process.
Escrow is an account separate from the mortgage account where deposit of funds occurs for payment of certain conditions that apply to the mortgage, usually property taxes and insurance. The escrow agent has the duty to properly account for the escrow funds and ensure that usage of funds is explicitly for the purpose intended.
Before the closing happens, the settlement agency must ensure that all the money that the lender and buyer expect to send into escrow matches the total amount expected by parties that need to be paid, such as the seller and real estate agents. This matching process means that accounting information is gathered and the order is “balanced.” [8]
Learn More: 20 Best Cities Where You Can Buy a House for Under $100K. ... To avoid surprises, check that your escrow account has enough money to cover potential increases.
The word "escrow" floats around often in the world of real estate, but do homebuyers really know what mortgage escrow means?
Upon acceptance of the sales contract, the buyer opens an escrow. An escrow commonly includes a signed agreement between the two parties plus an earnest money payment check which accompanies the offer, [15] and which is generally not deposited until all parties are in agreement. The escrow deposited then leads the seller to more property ...
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