When you encounter the term "escrow" in the context of a mortgage, it typically refers to a financial account managed by a neutral third party. This account holds funds on behalf of the buyer and seller during a real estate transaction. The third party, often an escrow agent or company, ensures that the funds are handled according to the terms of the agreement until the transaction is finalized.
This can include holding the buyer's earnest money deposit and managing payments for property taxes and insurance. Escrow helps protect both parties by ensuring that the funds are disbursed correctly and that all conditions of the sale are met before the deal is closed.
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