By: April WaltersWhat is "Escrow"?

Comprehending escrow can be uncomplicated if it is put into an easy definition. Escrow is basically when two factions who are entering into an agreement ask a third person to keep the property, services or monies pending the terms of the contract are reached. The most general type of escrow is during a mortgage. In the case of escrow for a mortgage, you make payments to the escrow account for the annual property tax and your home insurance. The third party in a mortgage escrow arrangement is the escrow agent. This person makes the payments for the first party's property taxes or home insurance when the deposit is made into this account. The lender, who you can think of as the second party, then has the confidence that the borrower can and will make the tax and insurance payments that are necessary.

Escrow Safeguards Both the Buyer and the Lender
During a real estate transaction, the buyer is responsible for making a down payment on the house, pre-paying interest, taxes and insurance on the property. An escrow account is set up with an impartial third party in a real estate transaction to maintain these funds. Since the third party, usually the title company, is not the buyer or seller of the property, it holds the funds as a way to safeguard the buyer and the lender from loss.

Who Needs an Escrow Account?
Escrow is advantageous to both the lender and the home owner because it helps manage the payments for insurance and property taxes each year. It also helps the lender if you ever default on your mortgage payment or if your home is damaged or destroyed. Even with these benefits, there are certain cases where home owners merely don't want to have to deal with an escrow account. One reason is that some home owners want to send in the payments themselves. Others want to earn interest on the money that would otherwise just be sitting in an escrow account. Other people are basically uneasy about the agent that would be making the escrow payments.

If You Don't Want an Escrow Mortgage Account
If you fall into this category of home owners that would prefer to not have an escrow account, the initial thing the first party needs to do is discover whether or not the lender allows for the escrow account to be waived. If you make a twenty percent down payment, many lenders will allow you to forgo the escrow requirement. Watch out for fees associated with waiving the escrow account, or even increased interested rates. Also keep in mind that some lenders simply do not allow an escrow account to be canceled.

April Walters is a busy real estate agent on the West Coast. If you are looking for a new home in the San Diego area, look at the gated Otay Ranch homes for sale. They offer both beauty and privacy. And be sure to check out the Oceanside luxury properties.

Article Source: www.BiGGooRoo.com

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