What Is Escrow?

When you start your search for a home many people are surprised by the amount of documentation, rules, and regulations you must follow. Included in those documents is something called “escrow”. Escrow is something that can benefit the homeowner, home buyer, and seller as well. In laymen’s terms, escrow is a legal document in which a third party holds the money until specific agreements have been met. This agreement between the home buyer and the home seller will add protection through the home buying process for both parties. On one side of the spectrum, this will help protect and preserve the “good faith deposit” and make sure the funds go to the correct place.

For the homeowner, it holds the money for insurance and property taxes. Even though escrow protects both the buyer and the seller it doesn’t always apply to every situation. Since every mortgage sale is different this can sometimes be required and other times not. It really depends on the type of loan that is used and the financial situation of the buyer and the seller. Many people decide to go the route that doesn’t include escrow because it does give the option in some cases to have a lower mortgage payment, but many risks come with that decision. If you are in the market for a new home or a refinance Better Lending is the perfect option for you! We can get you pre-approved today!