'Escrow' is a word that gets thrown around a lot when discussing buying a home. But do you know what it means?
An escrow account is a protected bank account that mortgage lenders use to ensure you don't default on your home insurance or property taxes. Each month, you pay escrow in addition to your mortgage payment.
Many mortgage lenders offer escrow as an additional service during the home buying experience. Some lenders like the Federal Housing Authority require escrow to take out a loan.
It's a weird word, but escrow is an important safeguard for both you and your mortgage lender. While it's an additional monthly cost, paying for your property taxes and insurance in escrow ensures that you don't get hit with a surprisingly high annual tax bill.