In real estate and mortgage finance, the term Escrow serves two distinct functions:
1. Transactional Escrow (Closing): During the purchase of a property, a neutral third-party escrow agent or title company holds earnest money deposits, title deeds, and loan disbursements. Funds are only distributed once all buyer and seller contingencies are met and legal documents are recorded. 2. Mortgage Escrow Account (Servicing): Once your mortgage is active, the loan servicer establishes an escrow impound account. Each month, a portion of your PITI payment (1/12th of annual property taxes and insurance) is deposited into this account. When property taxes and insurance bills come due, the servicer pays them directly on your behalf.