What Is Escrow?
The short definition
Escrow means a neutral third party holds something — usually money, sometimes documents — until agreed-upon conditions are met. In homebuying, it shows up in two different ways.
Escrow during the purchase
Your earnest money deposit is typically held in escrow by a title company or attorney until closing, so neither buyer nor seller controls the funds alone while the deal is in progress.
Escrow after closing
Many lenders also set up an ongoing escrow account as part of your monthly mortgage payment. A portion of each payment goes into this account, and the lender uses it to pay your property taxes and homeowners insurance on your behalf when they come due.
Why it matters
An escrow account after closing means taxes and insurance are handled automatically rather than requiring separate large payments once or twice a year.
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