4 Common FAQ's About Escrow Services
When closing on a real estate transaction, you may hear the term "escrow" thrown around. If you're unfamiliar with the real estate closing process, you may find yourself having a difficult time understanding all of the industry terminologies. At Arrowhead Title, the best title company at the Lake of the Ozarks, we strive to provide prompt and accurate title escrow and settlement services to our clients. We believe that educating clients on their real estate transactions can help make the process easier. Today, we are going to be discussing escrow services at the Lake of the Ozarks. Read on to learn more!
What is an Escrow Account?
An escrow, or "reserve account," is an account that is set up by a third-party to be used as a central source of funds for paying the mortgage obligations. These accounts are used to help protect the lender's investment in a buyer by having the account reserves added before payments are due. This is a beneficial item in the transaction because it allows the buyer to make one payment into the escrow account, rather than multiple payments going to the lender, insurance agent, and county. Another function of escrow accounts is to serve as a placeholder account for funds used to repair an incomplete house that the sellers have agreed to cover in the contact.
What Payments are Included?
We mentioned a few of the areas that the escrow account makes payments to after closing. Here, we'll dive into who is getting what out of your escrow account. Escrow accounts are typically used to cover payments for the mortgage, real estate taxes, homeowners insurance, and private mortgage insurance if you have it. The third-party is responsible for handling the escrow account and making the proper disbursements to pay these obligations on time.
How are Escrow Accounts Disbursed?
The initial setup of the escrow accounts will be completed at the settlement of the real estate transaction. The account will have prorated insurance, tax, and other relevant payments included in the initial loading of the account. It may seem like you're placing unneeded amounts of money into these accounts at closing, but trust your lender, title company, and insurance agent have worked diligently to balance on the total needed to ensure proper payments are made throughout the year after closing.