Definition: The word "mortgage escrow account" refers to a specific type of escrow account used in real estate transactions, particularly for home purchase or mortgage payment payments. It is typically used by lenders who are involved in the process of approving loans and then paying off these loans. An Escrow Account is a financial tool that allows property buyers to fund their down-payment on a home loan before they can actually make the full amount due on the loan, which is known as the "mortgage payment" or the "downpayment". This process is called "escrow," and the escrow account acts as a guarantee for the repayment of the loan. The money in the Escrow Account serves as a temporary source of cash until the borrower has received the full amount due on their home purchase. The word "mortgage escrow account" implies that the funds from the down-payment are transferred to this account and then the rest of the money is paid off in regular monthly installments over time, often after 30 or 60 days. The process typically involves the borrower providing all necessary documentation (such as a valid ID, proof of income, etc.) before they can apply for a mortgage. The specific requirements and procedures for obtaining an Escrow Account may vary depending on the lender's policies, but in general, borrowers are required to provide certain documents such as a letter from the bank or credit union, a signed agreement between both parties (e.g., borrower and lender) indicating the loan amount, and a receipt of the down-payment.
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