The true American dream is centered around home ownership. Home ownership gives a personal sense of responsibility and belonging. A home is a place where one finds shelter and protection. Homes provide comfort and security. A home is also a object of great value. Both in the relatively high amount a home costs but also in the historical amount of appreciation with respect to actual home prices. So many investments are just paper, like stocks. A stock is a piece of paper saying that an investor owns a invisible chunk of a company. A home is a tangible object that is subject to decay, damage, and destruction. Homes appreciate in value so long as they remain intact, in a good neighborhood, and are treated with respect.

Because of the high costs of homes, a home owner will rarely have enough money to pay the the entire cost of the home and will turn to a lending institution such as a bank to finance the home. When an individual turns to a bank to borrow money, they will sign the home to the bank as collateral for the loan. Meaning that if the home owner does not make good on their monthly payments, then the bank will have the right to foreclose on the home and take possession of it to sell it, and to try to regain the money lost from lending to the bad lender.

Eventually a home owner will hopefully be able to pay off the bank or to repay the mortgage in full. Or the case might have been that the homeowner was able to pay off the price of the home in full at the very beginning, and never did take out a mortgage. No matter what the case might be, whether there is no mortgage or there is a mortgage on the home, a home has NO value if it is burned to the ground. To hedge the cost of losing a commodity a home owner will want to insure the property, and the bank will demand that their collateral will not disappear on them one night. Therefore, homeowners insurance is an absolute necessity.

Another great cost of owning a home is the government. The government loves to tax anything it seems that is important. The government loves to tax homeowners or any owner of property. And the scary part is, if a person does not pay their charged property taxes, the government may reserve the right to take away the property, and again, the homeowner or the bank will be out thousands of dollars.

A problem arises though that both the insurance company and government charge their payments annually. The annual insurance and government payment may prove to be super steep and almost impossible to make if one is not prepared for it. The mortgage company cannot risk the inability of one of their clients to not make the annual payment so they will set up a escrow account.

An escrow account is basically a savings account set up specifically to pay the insurance company and the government. Every month the homeowner will make a required payment into an escrow account. The account will be managed by the escrow agent. In most cases the mortgage broker will also handle the escrow account. The agent then takes the responsibility of making the government and insurance payment each year. Therefore both parties are happy because the home is insured and the government is happy.

Author Bio: Juhlin Youlein writes about how to get great Chandler AZ homes for sale and Gilbert real estate deals for sales.

Category: Real Estate
Keywords: homes, real estate, buying a home, selling a home, realtor, realtors, loan, mortgage, foreclosure, s