What exactly is an escrow account?
A. There are two purposes for escrow. The first is to assure the lender that you will have enough money to pay property taxes and insurance costs. The money or other pledged assets are held by a third party, an escrow agent, until the mortgage is closed. The second duty of the escrow holder protects both the buyer and the seller of a property. The holder has the obligation to safeguard the funds. They are disbursed and the title to a property conveyed only when all of the provisions of the escrow agreement are met by the buyer, seller and lender. The disbursement amounts are shown on the closing statement of the mortgage. If you have made a down payment of less than 20 percent, the mortgage holder will be your new escrow agent for taxes and insurance. Instead of paying property taxes and insurance all at once when they come due, the mortgage holder will calculate the total cost and add 1/12 to each of your monthly payments. When taxes and insurance are due, the lender makes the payment
