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What is escrow on a house?
I’m trying to buy a home for the first time. I’ve been talking with realtors and lenders, and they keep throwing around the word “escrow,” which has me lost. What is escrow on a house?
Melanie Mergen · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Congrats on becoming a first-time home buyer! When buying a home, an escrow protects both the buyer and seller by having a third party hold the account or money. Once the seller and buyer meet each of their obligations, the money is released, like how a trust works.
There are two main reasons why an escrow is used in the home buying process.
When you make an offer on a home, it’s common to pay a certain amount of earnest money to indicate to the seller that you’re seriously interested in purchasing their home. While you wait to hear back on that offer, that money will sit in an escrow account until you reach an agreement.
Throughout your mortgage, an escrow account holds funds for
homeowners insurance
and property taxes.Once you’ve found the right place and you’re ready to set up your homeowners insurance,
Jerry
can help you make the process easy. You can even bundle with your car insurance
for further savings. The Jerry app can collect quotes from top insurance companies, like Berkshire, State Auto, Safeco, and Travelers, in seconds.
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- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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