Ignite FB Tracking PixelWhat you'll need to know about escrow accounts - Kristine Stell
RE/MAX Destinations & RE/MAX Southern Shores
Kristine Stell, RE/MAX Destinations & RE/MAX Southern ShoresPhone: (802) 782-2834
Email: [email protected]

What you'll need to know about escrow accounts

by Kristine Stell 02/07/2024

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. 

Escrow account basics

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. 

Property tax payments

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. 

How do I know when escrow is required?

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.

About the Author

Kristine Stell

I’m dedicated to helping my clients find the home of their dreams. Whether you are buying or selling a home or just curious about the local market, I would love to offer my support and services. I know the local community — both as an agent and a neighbor — and can help guide you through the nuances of our local market. With access to top listings, a worldwide network, exceptional marketing strategies and cutting-edge technology, I work hard to make your real estate experience memorable and enjoyable. Whether you're in the research phase at the beginning of your real estate search or you know exactly what you're looking for, you'll benefit from having a real estate professional by your side. I'd be honored to put my real estate experience to work for you. [email protected] or [email protected]