If you are a first-time home buyer (or just haven’t gotten your feet wet in the real estate market recently), a little education can go a long way in preparing you for what is likely the largest financial purchase of your life. When you are putting down a lump sum of your savings, you want to know exactly where your money is going. Beyond the purchase price of the home, your contract will include specific fees that will need to be paid upfront or as part of the closing process. What charges may a servicer require a borrower to deposit into an escrow account?

The answer depends on where you are in the purchasing process. Once the initial contract is signed, you will be required to immediately open an escrow account. This account acts as a third-party holder for your money and will not be released to the seller (or back to you if the contract falls through, depending on the terms) until closing. The initial earnest money deposit (usually between 1-5% of the purchase price) will cover closing costs, origination fees, property taxes and other costs.

Upon closing, it is likely that your lender will require you to keep an escrow account in order to pay the following:

• Home insurance premiums
• Flood insurance premiums
• Annual property taxes

Escrow gives your mortgage company a guarantee that your home insurance policy will not lapse (since they are the first payout listed for covered claims) and that you will not default on property tax payments. Your loan servicer will provide you with an annual escrow statement to itemize the deductions from your escrow account in order to pay these charges. The total amount is paid into escrow from your monthly mortgage payment and adjustments are made every year to ensure there is always enough in your escrow account to cover the charges. If your escrow account is overfunded, you will receive a rebate check for the excess amount.

While many questions about escrow can be answered by your loan servicer if you already have one, there’s only one name to turn to if you’re just getting started: Clear Title, LLC. For years, we have been Pensacola area’s first call for title searches, insurance, escrow services, closing services and more. When you’re ready to buy (or sell), be sure to have Clear Title, LLC on your side. Call one of our conveniently located offices for more information:

Pensacola: (850) 361-4029

Pace: (850) 994-3838

Pine Forest: (850) 202-8518