Escrow is one of the most-confused terms in real estate because it means two different things. This 2026 guide explains both meanings — the escrow account that holds your property taxes and insurance throughout the year, and the escrow process during a real estate transaction (the time between contract and closing) — and what each costs you in Hampton Roads.
Key takeaways at a glance
- Escrow account: a lender-managed account that holds your monthly property tax and insurance payments, then pays them when due.
- Escrow process: the period between offer accepted and closing, when a neutral title company holds funds and documents.
- Most loans require escrow if your down payment is under 20%. Conventional borrowers can sometimes waive escrow with 20%+ down.
- Escrow analysis happens annually; lenders adjust your monthly payment if taxes or insurance changed.
- In Virginia, the title company manages closing-process escrow; settlement is at the title company, not an attorney.
| Type | When | Held by | What it covers |
|---|---|---|---|
| Escrow account (impound) | Monthly, life of the loan | Lender / loan servicer | Property tax + homeowners insurance |
| Closing-process escrow | Between offer and closing | Title company | Earnest money + closing documents |
Both are called "escrow" but they're completely different — context tells you which one is meant.
In this guide
The escrow account (impound account)
Most mortgage lenders require an escrow account that holds 1/12 of your annual property tax and homeowners insurance with each monthly payment. The lender then pays the bills when due. This is sometimes called an impound account.
Why? Because the lender wants to make sure property taxes and insurance get paid — if either lapses, the lender's collateral (your home) is at risk.
Escrow makes your monthly payment "PITI"
With escrow, your monthly mortgage payment includes:
- Principal — pays down loan
- Interest — cost of money
- Taxes — escrowed
- Insurance — escrowed
Total monthly cost = PITI. This is what lenders qualify you on, not just principal-and-interest.
Annual escrow analysis
Once a year the lender re-runs the math. If property taxes went up or insurance increased, your monthly escrow contribution rises. If escrow accumulated extra cushion, you may get a refund check. Most Hampton Roads escrow analyses happen in late winter, with new monthly payments effective the following month.
Closing-process escrow
Separately, "escrow" refers to the period between offer accepted and closing — when the title company holds the buyer's earnest money and the contract while inspections, appraisal, and underwriting are completed. In Virginia, the title company is the neutral third party. See our walk-through checklist for the closing-day process.
Can you waive escrow?
Conventional loans with 20%+ down often allow escrow waivers (typically for an extra 0.125–0.25% rate adjustment). FHA, VA, and USDA almost always require escrow regardless of equity. Most first-time buyers can't waive escrow even if they want to.
Frequently Asked Questions
What is an escrow account in a mortgage?
A lender-managed account that holds 1/12 of annual property taxes and insurance with each monthly mortgage payment. The lender pays the bills when due.
Is escrow required?
Yes if your down payment is under 20% on most loan types. Conventional borrowers with 20%+ down can sometimes waive escrow.
What does PITI stand for?
Principal, Interest, Taxes, Insurance — the four components of a typical escrowed monthly mortgage payment.
What is escrow at closing?
The period between offer accepted and closing, during which the title company holds earnest money and documents while inspections and underwriting complete.
Why did my escrow payment go up?
Either property taxes increased (most common) or homeowners insurance increased. Lenders run an escrow analysis annually to adjust your monthly contribution.
Can I get an escrow refund?
Yes — if the escrow account has more cushion than required (typically 2 months of escrow), the lender refunds the excess after the annual analysis.
Who manages closing escrow in Virginia?
The title company (Virginia is a settlement-state, not an attorney-state). The buyer chooses the title company.
How much money sits in my escrow account?
Typically 2–3 months' worth of property tax + insurance as a cushion, plus monthly contributions toward the next bill due.
Have a question about your home purchase?
Talk to a Hampton Roads buyer's agent or loan officer who can walk through your specific situation - no pressure, no obligation.
Sources & further reading
Information reflects 2025-2026 conditions and rules. Always confirm current details with the relevant agency, lender, or licensed professional before relying on any specific figure or rule.
About the Author
The VaHome Team is dedicated to providing expert real estate insights for Hampton Roads, Virginia. Contact us at (757) 777-7577 or tom@vahomes.com.
About the Hampton Roads Real Estate Market
Hampton Roads is one of the most dynamic real estate markets on the East Coast, anchored by the largest naval complex in the world at Naval Station Norfolk and home to roughly 120,000 active-duty, reserve, and civilian Department of Defense personnel. The region spans seven cities — Virginia Beach, Norfolk, Chesapeake, Suffolk, Portsmouth, Hampton, and Newport News — plus the Peninsula communities of Williamsburg, Yorktown, and Poquoson, with each market carrying its own personality, school district, and price profile.
Buying or selling here means thinking about more than just a house. Tidewater geography means flood zones, hurricane preparation, and waterfront premiums matter. Military presence means BAH affordability, PCS season inventory crunches (May through August), and VA loan eligibility are top of mind for a meaningful share of every neighborhood. School quality varies block by block, especially across the seven independent city school divisions, and is often the deciding factor for relocating families.
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