How Does Escrow Work When Buying a Home?

Reader Question: "Can you tell me how the escrow process works when I buy a home? I have a rough idea, but not to the point of being comfortable with the process. Thanks."

The escrow process begins when you have a fully ratified contract (signed and agreed upon) with the seller. At this point, the documents and funds associated with your purchase will be transferred to a neutral third party. This person or entity is often referred to as the escrow agent, and they should be identified in your purchase agreement.

So when you hear a home buyer say, "We are in escrow right now," it means their purchase offer has been accepted by the seller and the house is now under contract. It also means that a third-party is holding whatever deposit money they've paid, as well as the signed purchase agreement.

Either the buyer or the seller can choose the escrow agent, legally speaking. But in most cases, the home buyer's mortgage company will use their preferred company. You will have to pay for this person's / company's services, and these fees will be part of your closing costs.

The escrow process ends when you actually close on the home, during the closing / settlement procedure. This is when all funds are transferred accordingly, when all documents are signed, and when you get the keys to your new home.

I hope this answers your question, and I encourage you to do some more research across our website. You'll find hundreds of articles and tutorials covering every aspect of the home buying process. Here are some articles related to your escrow question. This is a good place to continue your reading.

Related articles:
What Happens After the Offer is Made?
The Real Estate Closing Process Explained