“Escrow” can be extremely confusing because it has several meanings. That’s why we’re breaking them down.

Most likely, “escrow” isn’t a word you throw around everyday. But once you dive into the home buying process, it’s one you’ll definitely hear. And, it can be darn confusing. Why is it so confusing? Because it has several meanings.

While some lenders forget that you may be scratching your head thinking, “What the heck are they talking about,” we like to do things a bit differently here at Fairway Bellevue. We know a huge part of ensuring your loan is processed and closed successfully, is making sure you understand what’s going on. That’s why we’re taking the time to break down escrow and its different meanings.

Escrow – A third party account that holds your earnest money.

When you make an offer on a new home, you write an earnest money check.

This money doesn’t go to the seller until the negotiations are complete. Rather, it’s placed in “escrow,” an impartial third party account.

Escrow – A separate third party account where homeowner’s insurance premiums and property taxes are held.

When you take out a loan, your lender requires you to carry homeowner’s insurance. In the event of a natural disaster, this protects them and you. Additionally, you’re always going to have to pay property taxes. In order for your loan to close, your lender needs to know you have the capital to cover both of these expenses. To ensure you do, you’ll be required to place the necessary funds in an “escrow” account (also called a “reserve” fund).

Escrow – A process of calling in an escrow officer.

Perhaps the most confusing of all is, the “closing of escrow.” This is when an escrow officer (aka a closing agent) carefully checks each document. They ensure the sale is recorded with the local government, that the purchase funds are received by the seller and that the ownership of the home is transferred to you.


Have additional questions about escrow? Contact one of our loan officers today.