One of them is “escrow.” The simplest definition of escrow is that it is money that one party (you) deposits with a third party to hold until an agreement or event is complete.
In this case, you’re placing money in escrow while you and the seller of the home negotiate the contract. Once the contract is signed by everyone, the escrow money will be delivered to the seller. Escrow protects everyone involved and makes sure no money changes hands until all of the conditions in the agreement have been met.
Your lender will also create an escrow account. This reserve account will hold the money for property taxes and homeowner’s insurance. You deposit the money for these bills, and your lender will distribute them for you.
An escrow account is created and managed by an escrow officer at an escrow company, a title company, or a company that does both. This person will also manage the paperwork involved with holding and distributing the money.