Purchasing a new home is an exciting time for any family. If you're in the process of buying that home right now, you may have questions about simple terms like "what is escrow?" and "how does it work?"
What is escrow?
In basic terms, escrow is a financial arrangement where a 3rd party holds and regulates payment of funds. Escrow makes real estate transactions more secure by keeping payment in a secure escrow account that is released when all the terms of your real estate agreement are met.
What is an escrow officer?
An escrow officer ensures your home closing goes smoothly. Typically a lawyer or a company representative, the escrow officer will hold all the important documents surrounding your real estate transaction until all the terms of the purchase are met.
Two Types of Escrow
If you're in the middle of your own real estate transaction, you may be confused about the different types of escrow accounts.
Your earnest money
Once you make an offer, you will write a check for earnest money which is placed in escrow. This earnest money will not go directly to the seller until closing. Instead, it is held in an escrow account until you and the seller negotiate a contract and close on the home.
Paying your property taxes and insurance
A second type of escrow account happens between you and your lender. Mortgage lenders create an escrow account to pay property taxes and insurance. This is collected monthly along with your mortgage payment.
Closing of escrow
After your closing and the purchase is completed, your escrow officer will oversee the final paperwork. This includes handling the exchange of funds, recording the deeds, ensuring documents are signed and recorded. Once all the requirements are fulfilled, you will receive a final closing statement in the mail.
Still have questions about escrow and home closings?
Twin City Title is here to help. We specialize in title insurance and ensuring that your home purchase and closing is completed with ease.