You'll probably hear the word escrow many times during your home buying transaction, and the term can be confusing, because it is used to describe different events that take place before and after the real estate settlement, the day of closing when the property becomes yours.
Let's take a look at the definition of the term escrow and the different ways it comes into play during your home buying transaction.

Escrow: Documents or something else of value, often money, held by a neutral third party in order to be used at a later date to fulfill an obligation.

Escrow During the Home Buying Process

Earnest Money Deposits
If you are buying a home, your first exposure to escrow was probably associated with the earnest money deposit that accompanied your offer to purchase the house.

That money likely went into someone's trust account, where it will remain in escrow, protected by that neutral third party, until it is credited to you when the transaction closes (or is dispersed in other ways if the transaction fails to close).

source: About, Inc.