Escrow accounts when buying a house in Washington usually refer to the temporary account used during the purchase transaction. It is where certain buyer funds are held by a neutral third party until the sale is ready to close.
That purchase escrow is different from the separate mortgage-servicing escrow account some homeowners have after closing for property taxes and homeowners insurance. This guide focuses primarily on purchase escrow so first-time buyers can better understand what it is, what money may go into it, who manages it, and how it supports closing in Washington.
There can actually be two different escrow accounts associated with a home purchase and mortgage loan. The first one is used during the home buying process and includes the earnest money deposit, down payment and closing costs.
The other type of escrow account is used for property taxes and insurance, and typically managed by your mortgage loan servicer. After closing, your servicer will take a portion of your monthly payment and hold it in an escrow account until your tax and insurance payments are due.
But for the rest of this article, we will focus on the escrow account that is used during the home buying process. This is the one that will include things like the earnest money deposit and down payment, which is used to facilitate the closing process.
Within a home buying context, an escrow account is basically a special type of account that’s used to hold and manage various funds associated with a purchase.
There are companies that specialize in managing these types of accounts, and they are naturally referred to as escrow companies. The individual person who handles your account is usually referred to as the escrow agent.
In the state of Washington, escrow companies act as a neutral third-party to handle the exchange of funds and documents between the buyer, seller, and other involved parties. They may also record the transaction with the appropriate government agencies and provide final closing statements to all parties involved.
You might think of the escrow account as a kind of temporary “holding container” for funds relating to the purchase of a home. The home buyer puts money into this account, and it gets held there until certain conditions are met.
When those conditions are satisfied, the agent will release the funds to the appropriate parties.
So, what kinds of “funds” go into the escrow account? Good question! While the process can vary from one home buying scenario to the next, it’s basically the same across the board. The escrow account can include the buyer’s down payment, closing costs, and other fees.
What does purchase escrow actually hold?
In a Washington home purchase, escrow commonly holds funds tied to the transaction itself. That can include the earnest money deposit, the buyer’s down payment, closing costs, and other purchase-related amounts that need to be collected and disbursed before settlement is completed.
Why is the escrow company involved?
The escrow company serves as a neutral third party. Instead of the buyer or seller holding money directly, the escrow agent manages the funds and documents according to the terms of the transaction. This helps everyone move toward closing with clearer handling of money and paperwork.
What does the escrow agent do for the buyer?
An escrow agent helps coordinate the financial side of closing by making sure required funds are received, documents are handled properly, and money is released only when the transaction is ready to be finalized. In many cases, the escrow company also helps keep the closing timeline on track.
Are there escrow-related fees?
Usually, yes. Buyers often pay a fee for the creation and management of the escrow account, and that fee is typically included within closing costs. The exact amount can vary based on the transaction and other factors.
How does escrow help the closing process?
Escrow helps create an orderly closing by holding funds until conditions are satisfied and then distributing money to the appropriate parties. For buyers, that structure can make the process feel more secure and easier to follow, especially during a first home purchase.
Note: This article explains how the escrow process works when buying a home in the state of Washington. This process can vary slightly from one transaction to the next, so portions of this article might not apply to your particular situation.
For many buyers in Washington, the first money that goes into purchase escrow is the earnest money deposit after a purchase contract has been accepted. Later in the process, additional funds are often delivered closer to closing.
The total amount due before settlement can depend on several items working together, including your down payment, lender-required closing costs, prepaid items, credits, and other adjustments shown before closing. The exact timing and delivery instructions can vary based on the contract, lender, and escrow company, so buyers should confirm the final amount and approved wire or payment instructions directly with their escrow officer and lender.
If you’re planning to buy a home in Washington, Sammamish Mortgage can help. We have been serving borrowers across Washington, Idaho, Oregon, Colorado, and California since 1992. We offer a broad range of mortgage programs, including our fixed-rate mortgages, adjustable-rate mortgages, and jumbo loans. Visit our website to use our mortgage calculator or to get an instant rate quote. Contact us today if you have questions about applying for a mortgage, or to get pre-approved.
No. The down payment is one possible source of funds, while escrow is the account used to hold and manage money related to the purchase transaction.
Purchase escrow can hold the earnest money deposit, down payment, closing costs, and other purchase-related amounts that need to be collected and disbursed for closing.
Typically, an escrow company holds the funds, and the escrow agent manages the account as a neutral third party for the transaction.
Earnest money is part of the purchase escrow process, but whether a buyer keeps or loses it depends on the contract terms and the specific situation.
No. Purchase escrow is used during the home sale. A mortgage-servicing escrow account is a separate account that may be used after closing for property taxes and homeowners insurance.
Earnest money may be deposited after contract acceptance, while additional funds are often provided later, closer to closing, once the final amounts are known.
Escrow-related fees are usually included in closing costs, but the exact amount can vary based on the transaction and other factors.
Escrow is the process commonly used to hold and disburse funds during a Washington home purchase, with a neutral third party managing the money and documents for closing.
In Washington home purchases, escrow companies commonly handle the exchange of funds and documents as a neutral third party to support closing.
In Washington, escrow companies commonly manage the purchase escrow process by holding funds, handling documents, and helping move the transaction toward closing.
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