If you’re new to the homebuying process, you may be introduced to a plethora of new terms you’ll need to know. Escrow accounts are no doubt on the list.
Having an escrow account is often required by mortgage lenders, so getting a better understanding of what they are and how they work can help ease you into the process.
So, what exactly is an escrow account, and what is it used for? Escrow accounts are set up during the homebuying process and act as a neutral third party to hold important contracts, earnest money and other important information related to the home sell.
After the purchase of a home, your lender can use your escrow account to manage insurance premiums and property taxes and insurance.
Every year when your tax office issues property tax bills, your lender uses money collected in your escrow account to pay off the taxes. If there isn’t enough money in your escrow account, they’ll reach out to you to make up the difference.
If the amount owed is less than what’s in your escrow account, your lender can credit you for the next tax year.
As standard practice, an escrow account is required if your home down payment is less than 20 percent of the total purchase price.
Some loan types such as FHA loans also require an escrow account. In some cases, you can cancel an existing escrow by providing proof of regular and on time home payments.
Escrow accounts may seem a bit confusing at first, so take your time as you learn more about them and consider speaking with an escrow officer for assistance if need be.
Originally from Statesville, NC I grew up vacationing in the Myrtle Beach area and have been blessed to call it home for the last 21 years. An alumni of Appalachian State University, I have been a Realtor for 11-years in the Grand Strand area, and am licensed in both South and North Carolina. I hold several distinguished Realtor designations, including ARB, MRP, SRES, RSPS, SFR, and XCL. I love being involved in the Coastal Carolina Association of Realtors, having served on the Young Professionals Network committee, the Community Outreach committee, and am a 2022 graduate of Leadership CCAR. As a proud member of the Women's Council of Realtors Grand Strand, I had a role as the events committee chair for 2023 and now hold the current position as the 2024 WCR events director. I have also contributed as a board member for the last 9 years for the Humane Society of North Myrtle Beach and currently serve as treasurer. In my spare time, I love traveling, shopping, and spending time with her family, friends, and 3 cats.
