{"id":369067,"date":"2016-04-04T10:47:11","date_gmt":"2016-04-04T15:47:11","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/realestate\/buying-a-home\/escrow.html"},"modified":"2023-08-25T11:40:45","modified_gmt":"2023-08-25T16:40:45","slug":"escrow","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/realestate\/buying-a-home\/escrow.html","title":{"rendered":"How Escrow Works"},"content":{"rendered":"\n
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How Escrow Works<\/h1>\n
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\n By Melissa McCall, J.D.<\/a> | Legally reviewed by Katrina Wilson, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

For many people, a house is the most expensive purchase they will ever make. Since real estate transactions are complex and lengthy, many homebuyers use an escrow company or agent to manage their funds.<\/p>\r\n

This article will explore the escrow process and how escrow works in homebuying.<\/p>\r\n

What Is Escrow?<\/h2>\r\n

Escrow refers to a type of account used in a real estate transaction. Alternate terms include escrow company or escrow agent. An escrow company or agent is a neutral third party that handles aspects of the transaction. Using an escrow account protects the lender, the seller, and the buyer\/borrower, reassuring them during the home purchase transaction.<\/p>\r\n

Anyone can misuse or steal funds intended for the new home purchase without an escrow account. The time frame for using an escrow account is not limited to closing on the real estate transaction. Lenders often require borrowers to maintain an escrow account to cover closing costs.<\/p>\r\n

Types of Escrow Accounts<\/h2>\r\n

There are several types of escrow accounts for real estate transactions. The first is a homebuyer’s escrow account. The second is a homeowner’s escrow account.<\/p>\r\n

Homebuyer’s Escrow Accounts<\/h3>\r\n

Escrow accounts for homebuyers hold funds, including your good faith deposit, during the homebuying process. This type of escrow account is a mortgage escrow account. These accounts hold and distribute funds for the mortgage lender. Your mortgage lender will set your escrow payments.<\/p>\r\n

Homeowner’s Escrow Accounts<\/h3>\r\n

Escrow payments during homeownership often include the following:<\/p>\r\n