Escrow
A third-party process or account used to handle funds securely during and after closing.
Definition
Escrow can mean the neutral company handling your closing or the account your lender uses to collect taxes and insurance as part of your monthly payment.
Category: Closing
Escrow during a home purchase
In a purchase transaction, escrow refers to the neutral party that holds deposits, coordinates signed documents, receives lender funds, and makes sure money only moves once all conditions are satisfied.
Escrow after closing
After the loan closes, your lender may maintain an escrow account for property taxes and homeowners insurance. Part of each monthly payment is collected and held so those bills can be paid on time.
Why the number changes
Monthly escrow can rise if your tax bill or insurance premium increases. That can change your mortgage payment even when your principal and interest stay the same.
Related glossary terms
- Closing Costs - The collection of fees charged to finalize your mortgage and transfer ownership.
- Cash to Close - The final dollar amount you need to wire or bring to closing.
- Loan Estimate - The early disclosure that outlines a mortgage offer's rate, payment, and fees.
Related loan programs
- Conventional Loans - Conventional loans aren't backed by a government agency, follow Fannie Mae and Freddie Mac guidelines, and reward strong credit with the lowest rates and most flexible terms available.
- FHA Loans - FHA loans are insured by the Federal Housing Administration and let you buy with as little as 3.5% down and a 580 credit score, making them a top choice for first-time buyers and credit rebuilders.
- VA Loans - VA loans are guaranteed by the Department of Veterans Affairs and let eligible veterans, active-duty service members, and surviving spouses buy with zero down payment and no monthly mortgage insurance.