When you pay the earnest money to the seller as part of your down payment, you’re showing good faith that you intend to buy the home. The money goes into an escrow account held by a neutral third party, such as a title company, until all the contingencies and conditions of the purchase are met, or the purchase contract is voided.
After the transaction is closed, the loan servicer or lender takes over and safeguards the money funded by your monthly mortgage loan payment in an escrow account. The servicer pays the lender, mortgage and property insurers, and other entities on your behalf. They also save and pay the funds earmarked for annual property taxes when they’re due.
If the current escrow is short of funds because of an adjustable loan reset or your property taxes have risen, the servicer lets you know promptly. They calculate your new monthly payment to not only make up the shortfall, but to cover all monthly and annual payments due.
Escrow accounts are secure and simplify payments for everyone.
