When you are buying a home — whether as a first-time home buyer or an experienced one — there is a better-than- average chance you will encounter confusing jargon, and unfamiliar terms and phrases. One such term is “escrow” which can mean different things depending on where you live. In California, for example, the phrase “close of escrow” means that a real estate transaction has been completed and the home sale has been made final.
A mortgage escrow means something different. In mortgages, escrow refers to the accounts used to pay a homeowner’s property taxes and hazard insurance. Each month, you send to your lender 1/12 of the annual amount due for taxes and insurance along with your usual mortgage payment. Then, when the bills come due, the lender pay them on your behalf.
Together, your payment is known as your PITI — Principal, Interest, Taxes, and Insurance.
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