If you’re buying a home, you’ve probably heard the word escrow tossed around. It sounds fancy. Maybe even a little intimidating. But don’t worry — escrow is actually a helpful tool that’s designed to protect you during the homebuying process.
Here’s the short version:
Escrow is a way to safely hold money or documents while you buy a home, and later, to help manage property taxes and insurance.
Still curious? Let’s break it down in plain English.
When your offer on a home gets accepted, you’ll usually deposit some earnest money — kind of like a “good faith” payment — to show you’re serious about buying.
That money doesn’t go straight to the seller. Instead, it goes into an escrow account, which is managed by a neutral third party like a title company or real estate attorney. They hold the money until the deal is done.
If everything goes smoothly: That money is applied to your down payment or closing costs.
If something falls through (and it’s covered in your contract): You usually get your money back.
It’s like a security deposit — but for your home purchase.
Once you’ve bought the house and moved in, escrow doesn’t disappear. Instead, it shifts roles.
Your lender may set up a mortgage escrow account to collect money for:
Rather than paying these big bills once or twice a year on your own, your lender adds a little bit to your monthly mortgage payment. That money goes into your escrow account — and when the bills come due, your lender pays them for you.
It’s automatic. It’s easy. And it helps you avoid big surprises.
Lenders want to make sure your home stays protected — after all, they’ve invested in it too. If you skip insurance or fall behind on taxes, it puts both of you at risk.
With escrow, they can make sure those bills are paid on time, every time. And for most homeowners, it’s one less thing to worry about.
Sometimes, yes.
If you put down 20% or more and have a conventional loan, your lender might let you handle taxes and insurance on your own. But it means staying super organized — and setting aside money regularly so you’re ready when big bills hit.
For many people, letting the account do the work is the smarter move.
💡 Who holds the escrow account?
Before closing, it’s a title company or attorney. After closing, your lender or loan servicer manages it.
💡 Can my escrow payment change?
Yes. If your taxes or insurance go up or down, your escrow account will adjust. Your lender will review it yearly and let you know.
💡 What if there’s extra money in the account?
You may get a refund or credit it toward future payments.
Escrow isn’t just a technical term buried in your mortgage papers. It’s a system built to protect your money, your investment, and your peace of mind.
From your very first deposit to your future tax bills, escrow helps take the guesswork out of one of life’s biggest decisions — buying a home.
That’s what we’re here for.
Reach out to your local ALCOVA Mortgage expert today — and let’s make homeownership easier, together.
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