Do I Have to Pay Escrow?

A new home buyer asked their Realtor: “If we are putting 30% down, do we still have to pay escrow?”  It’s a good question, but first we need to know what they are really asking.

One meaning of “escrow” is the company we use in our home loan transaction.  The escrow company is the disinterested third party who makes sure that both buyer and seller perform their part of the purchase contract.  The buyer’s Realtor chooses which company to use when writing the purchase offer.

In our area, it’s customary for buyer and seller to split the escrow fee.  (The exception would be when a buyer is using their VA loan entitlement, in which case buyer is not allowed to pay for escrow fees.)  So in this regard, “yes” the buyer has to pay escrow.  They have to pay their portion of the escrow company’s fees.

Another meaning of “escrow” refers to the collection of property taxes and homeowners insurance monthly, as part of the mortgage payment.  This is required when you take a government loan (FHA, VA, USDA) or when you put less than 10% down.  So, in this example, the buyer has the choice of paying taxes and insurance monthly, or annually, because of their large down payment.

The Tehachapi Area Association of Realtors is on a mission to spread the word that local is better.  We’re encouraging those who buy or sell homes in our area to choose our local professionals for more personal and accurate real estate transactions.  Please interview us first, when needing your next home loan or listing your home for sale.

Tammy Engel is your local Mortgage Advisor.  She’s been working for your best interest since 1990 with purchase, refinance, and reverse mortgage.  Contact her at 661/822-7325 for your mortgage transaction.  NMLS #235051 CalBRE#01273839