How does an escrow account work?
If you are considering the purchase of real estate in Katy, Texas you’ll want to familiarize yourself with some of the processes such as escrow. It is important to understand what an escrow is and how it will benefit both you, as the buyer, as well as the lender involved.
Let’s start with a basic idea of what escrow actually is. Imagine you have made a small bet with a friend, you may ask a third party to hold the wager until the outcome of the bet is decided, so that neither party can back out of the bet, this is the essence of escrow.
From a Katy real estate point of view, anybody purchasing one of the many homes in Katy will usually be required to open an escrow account on mortgage completion. This escrow account is used to cover property taxes and homeowners insurance, the payment amount will usually be added to your monthly mortgage repayments. The agent who is holding your escrow account will then disperse these funds to the relevant agencies once taxes and insurance become due.
The purpose of the escrow account is to protect the lender by ensuring that you pay your taxes and keep up to date with your insurance payments. If you neglect to pay your taxes, the municipality may attempt to collect the debt against your property, making it hard to sell should you default on your mortgage. In a similar fashion, if you forget to keep up to date with your insurance, and your house burns down, your mortgage lender has lost it’s only collateral on your loan. In this sense it also protects you.
Escrow is designed to protect people, usually it will be fairly transparent to you as a Katy Texas home owner, as it is organized alongside your mortgage, and is funded directly from your mortgage repayments.
Filed under: Buyers, Escrow, Katy Family Homes
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