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What is the Mortgage Escrow Process

What is the Mortgage Escrow Process?

The term “escrow” is applicable to various industries, but you’re probably most familiar with it in the context of buying a property.

By definition, “escrow” refers to “a deed, a bond, money, or a piece of property held in trust by a third party to be turned over to the grantee only upon fulfillment of a condition.”

In specific regards to real estate, a mortgage escrow is an arrangement between the buyer and seller of a property. Going into escrow signifies that both parties are serious about the transaction.

The process begins with a seller accepting an offer from a buyer.

The two parties must then agree on certain stipulations regarding the details of the purchase in the form of a purchase agreement.

The purchase agreement breaks down different aspects of the transaction to make sure everyone is on the same page. For example, it will likely detail the purchase price of the home, a description of the property, any contingencies either party has, and a projected closing date, as well as any other components of the transaction the parties would like to address.

The buyer and seller also need to agree on the escrow agent they will work with.

An escrow agent is a neutral, third-party from a bank, title company or legal practice. The agent’s job is to take control of the property until both the buyer and seller meet their purchase agreement terms and are ready to close on the property, completing the transaction. The buyer’s and seller’s realtors will likely know of a few agents they can choose from.

The next part of the mortgage escrow process is for the buyer to provide the escrow agent with a certain amount of funds, also known as an earnest money deposit, once the agreement is signed. This money is also held by the agent until the transaction is complete. If for some reason the deal does not go through, the buyer will get that money back.

As aforementioned, going through this process shows the buyer and seller are genuine about making such a large transaction. This specific act of putting down an earnest money deposit reinforces this notion, specifically when it comes to the buyer.

Once the escrow agent is sure that both parties upheld their end of the agreement, he or she will distribute any other funds in the escrow account to the appropriate people.

For instance, the buyer’s earnest money deposit will like go towards the down payment of the home. He or she will also give the property deed to the buyer, signifying the official transfer of ownership.

The final step of the process is the escrow agent getting compensated for his or her services. This is usually a small percentage of the home’s purchase price.


Before you can go into escrow on a home, you need to get approved for a mortgage, whether an FHA, VA, USDA or conventional loan. Contact Contour Mortgage today to find out how we can help you buy your dream home.

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Topics: Home Buyers

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