Broadly speaking, the term “escrow” refers to the practice of holding something of value (such as money) by a neutral party to be used at a future date.
In home buying, escrow accounts come into play in two major ways. First, homebuyers will likely be asked to make a deposit on their future purchase of the home to show that they are serious about their intent. This money will be held in escrow until the deal closes; at that time, the good faith payment goes toward the total payment made at closing.
Once a homebuyer has completed the purchase, he or she can expect to have tax and insurance payments included in the monthly mortgage bill. These funds are held in an escrow account by the lender and distributed to the government and insurers at the end of the year. The U.S. government pushed for the use of escrow accounts after problems in the 1930s. Because many homeowners failed to save enough money throughout the year, they were unable to pay home-related taxes and were going into foreclosure en masse.
About Carmen Arruda:
As an Assistant Vice President and Regional Account Manager at the Bellevue, Washington, office of Fidelity National Title, Carmen Arruda provides a variety of real estate and closing services to her clients. Ms. Arruda has held her current position since 2004.
In home buying, escrow accounts come into play in two major ways. First, homebuyers will likely be asked to make a deposit on their future purchase of the home to show that they are serious about their intent. This money will be held in escrow until the deal closes; at that time, the good faith payment goes toward the total payment made at closing.
Once a homebuyer has completed the purchase, he or she can expect to have tax and insurance payments included in the monthly mortgage bill. These funds are held in an escrow account by the lender and distributed to the government and insurers at the end of the year. The U.S. government pushed for the use of escrow accounts after problems in the 1930s. Because many homeowners failed to save enough money throughout the year, they were unable to pay home-related taxes and were going into foreclosure en masse.
About Carmen Arruda:
As an Assistant Vice President and Regional Account Manager at the Bellevue, Washington, office of Fidelity National Title, Carmen Arruda provides a variety of real estate and closing services to her clients. Ms. Arruda has held her current position since 2004.