As a specialist in escrow services, can explain, escrow is an important part of homeownership. To some, it may seem like an unnecessary complication, but that couldn’t be further from the truth: In fact, escrow is unavoidable unless you’re in very specific circumstances, so it’s important to understand the ins and outs of escrow as you set out to purchase your home.
At its most basic, escrow is a legal arrangement that allows a third party to hold a large amount of money or property. This third party holds the money until certain conditions are met. When it comes to real estate, escrow accounts keep both the buyer and seller protected. However, there are two different types of escrow accounts, and learning about these types of accounts is key to understanding the importance of escrow.
Escrow Accounts for Home Buying
When you buy a house, the seller will usually require a “good faith” deposit to prove that you’re serious about the purchase. Buying a house requires many different hoops to jump through, and if you fail to complete these steps, the seller will keep the deposit. However, if you complete the necessary steps to purchase your home, the good faith deposit will go towards your down payment.
Escrow accounts for home buying are intended to signify that you’re ready and willing to buy a home, and they keep the seller protected by providing financial incentive for both sides of the aisle over the course of the sale. However, once you own a home, you’ll still need an escrow account.
Escrow Accounts for Homeowners
Escrow accounts for home owners are intended to make life a lot easier when it’s time to pay taxes or pay for insurance. Instead of having to make one or two giant payments over the course of the year, your escrow account will automatically deduct money from your mortgage payments to keep the money aside for taxes and insurance.
If you’re a homeowner with an escrow account (like countless other Americans) you’ll have a much easier time making payments for taxes, insurance, and your mortgage. Instead of having to cut three different checks, it’s all in one. And again, you won’t have to make a giant payment for taxes or insurance every year. Escrow accounts for home owners ensure there is enough left over to pay taxes and insurance, while also streamlining the payment process.
Reach Out to an Escrow Service Today
In certain situations, you can avoid escrow. Unfortunately, those situations are pretty rare: If you get an exceptionally good rate on your mortgage, you might be able to avoid escrow. Additionally, if you’re able to pay more than 20% down on your house, it might be a possibility. Because mortgages can be steep, and it’s rare to have that much cash lying around, it’s a good idea to reach out to a specialist in escrow services to fully understand what you’ll be in for when you purchase a home.