Escrow - A neutral third party holds documents andmoney for a real estate transaction and ensures that all conditions of a saleare met. Escrow refers to a special account that a lender uses to hold aborrower's monthly payments on property taxes and insurance.

The amount of money that you will be required to come up with at escrowdepends on a number of factors, including the cost of the house and the type ofmortgage you get. In general, you need to come up with enough money to coverthree costs earnest money - the deposit you make on the home when you submityour offer, to prove to the seller that you are serious about wanting to buythe house; the down payment, a percentage of the cost of the home that you mustpay when you go to settlement; and closing costs, the costs associated withprocessing the paperwork to buy a house.

When you make an offer on a home, your real estate broker will put yourearnest money into an escrow account. If the offer is accepted, yourearnest money will be applied to the down payment or closing costs. If youroffer is not accepted, your money will be returned to you. The amount of yourearnest money varies. If you buy a HUD home, for example, your depositgenerally will range from $500 - $2,000.

The more money you can put into your down payment, the lower your mortgagepayments will be. Some types of loans require 10-20% of the purchase price.That's why many first-time homebuyers turn to HUD's FHA for help. FHA loansrequire only 3.5% down - and sometimes less.