How Escrow Works in Tennessee
Escrow During a Home Purchase
Escrow means money is held by a third party for a specified purpose. During a Tennessee home purchase, you may hear the word used for earnest money held under your purchase agreement and for a mortgage account used to pay property taxes and insurance. These serve different purposes.
Earnest money during your purchase
Your purchase agreement identifies the deposit amount, delivery deadline, holder, and conditions for disbursement. Confirm where and when to deliver the funds. At closing, the deposit is generally credited toward your purchase.
If a transaction ends before closing, a refund is not automatic. The agreement, applicable requirements, and circumstances determine what happens next. Read the earnest money and due diligence guide and raise questions before your deadlines.
Preparing for closing
The closing professional coordinates documents, settlement figures, and disbursements within their role. Your lender, title or closing professional, and agent each have responsibilities. An escrow holder cannot guarantee that a sale closes on time or resolve every contract dispute.
Confirm outstanding requirements and review your closing costs before closing day. Verify payment instructions directly with the closing office using a trusted phone number.
Tasks Your Closing Professional May Coordinate
- Prepare escrow guidelines
- Perform a title research
- Comply with the bank’s guidelines as outlined in the escrow agreement
- Accept payments from the buyer
- Prorate insurance, tax, interest, and other payments according to instructions
- Record deeds and other documents as instructed
- Request title insurance policy
- Close escrow when all terms of agreement of seller and buyer have been met
- Disburse payments and finalize instructions
Questions to Discuss Before Closing
- Who is holding the funds, and what conditions govern their release?
- Which expenses are due at closing, and which will be paid through my mortgage escrow account?
Mortgage Escrow Account
A mortgage escrow account is separate from your purchase deposit. Your lender or servicer collects part of your monthly payment to pay covered expenses, commonly property taxes and homeowners insurance, when due. Some loans require an escrow account.
Taxes and insurance premiums can change, so the escrow portion of your payment can change even if your loan has a fixed interest rate. Ask your servicer what the account covers and review its statements. If you do not have an escrow account, plan to pay those expenses directly.
See the CFPB explanation of mortgage escrow accounts or contact Charlie about the steps in your local home purchase.