The Basics of Escrow
The multitude of steps and terminology involved in buying a house can be overwhelming. While realtors will walk you through everything you need to know, it helps to have a firm understanding of some things before you get pre-approved and start making offers.
One key component involved in nearly every sale is the escrow, or impound account. This is an account set up by your mortgage lender to pay certain property-related expenses on your behalf (property taxes and homeowner’s insurance). Many (mortgage) lenders require an escrow account, to insure that the property is not at risk. The fees can vary from year to year, and are generally rolled into monthly mortgage payments.
Many states require an escrow account, but even if yours doesn’t, it’s prudent to have. Without an escrow account, homeowners will be responsible for large property-related bills in lump sums, and not always at convenient times. Failure to pay property taxes in a timely manner will also result in fines and fees.