When buying a home, you’ll run into the word escrow. You’ll start to Google it and find out, WTH, what does this word really mean?

Escrow is used in different settings and will have different meanings, so let me provide you with the times I’ve heard it the most.

• Congratulations, we’re in escrow!
• Do you want to open an escrow account?
• We’ve opened escrow with ABC Title Company.
• Hi, I’m your escrow officer.

When you hear your realtor say, “Congratulations, we’re in escrow!” This means the sellers have agreed to your offer, and you’re now in contract.

When you hear your loan officer ask you, “Do you want to open an escrow account?” In short, that means, do you want the servicing lender to pay for your taxes and insurance when they come due, or do you want to pay them on your own?
To have the servicer pay, they’ll collect the money from you on a monthly basis, save it in an escrow account, and pay your taxes and insurance when they’re due, so you don’t miss a payment or have to pay a lump sum.
Example: In California, property taxes are due twice a year. Homeowner’s Insurance (HOI) is due once a year. If you choose not to have an escrow account, you’ll be left paying those two bills on your own, and they can be pretty hefty.
Look at my property tax bill. Do you want to pay that $4,769.31 on your own or have it broken down month-by-month?


See example of a mortgage statement depicting the escrow payment and balance.

When you hear, “We’ve opened escrow with ABC Title Company,” that means ABC Title Company has been selected to facilitate the transaction between buyer and seller until completion. This title company is the middleman for your purchase. They make sure to stay neutral within the transaction and will move money to it’s respective party once the loan closes.

And lastly, when you hear, “Hi, I’m your escrow officer,” This means this person is the main point of contact to discuss getting fees, title reports, closing protection letters, and confirming wiring information.