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.
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.
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.
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.
Terese Ferrara is a long-time resident of the Bay Area and has been a partner with The Goss Real Estate Group for many years. She and her husband raised their two daughters in San Jose, where she successfully continues to build her real estate career.
After earning a bachelor’s degree from San Jose State University, she went on to teach in the San Jose Unified School District for 9 years. Transitioning to real estate was a logical choice, utilizing her patient demeanor to educate all levels of buyers and sellers. Knowledge and experience demonstrate her vested interest in delivering the highest level of care and professionalism to every client. She consistently strives to exceed her client’s expectations throughout the entire real estate transaction and remains a trusted advisor long after each close.
As a board member on KW Bay Area Estates’ Associate Leadership Council (ALC), she aids in support of culture and professional development strategies for over 180 associates. Terese is also a Director for the Santa Clara County Association of Realtors Foundation, which supports community service initiatives in Silicon Valley.
Terese is the consummate real estate professional dedicated to providing unparalleled service to her clients through ongoing training and education, keeping her on top of the dynamic market and latest real estate trends. Her high-touch approach coupled with honesty and integrity support her commitment to her client’s real estate needs.
