Escrow and earnest money

An escrow account is essentially a holding tank.

During a real estate transactionthe escrow officer—usually a lawyer or title company representative—holds all the important documents and deposits while the buyer and seller work out the details. After the closingthe escrow agent records the deed and title transfer that make the home officially yours.

How do closing costs impact the interest rate? Most transactions involve a second type of escrow account, between you and your lender. Many mortgage lenders hold money in escrow to pay property taxes and insurance. Each month, you pay a portion of the estimated annual costs along with your principal and interest.

At the end of the year, the lender adjusts your monthly escrow amount based on the actual tax and insurance bills. If you graphs on the stock market crash during 1929 in too much, the lender will refund your money.

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