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What is Escrow?
Let's talk about "escrow". When you're closing on your new house, an escrow holder is used to guarantee the transaction will close without problems and in a certain amount of time. Escrow holders hold money for "safe-keeping" in transactions between a buyer and seller. PayPal is a simple way to think of an escrow company.
Settling the last details like receiving funds, signing forms, getting the documents for loans and liens, and assuring you get a clean title to the home before your purchase gets finalized are all part of the job of the escrow holder.
Escrow holders want to obtain the following forms:
- Fire and other insurance policies
- Title insurance policies
- Terms of sale and any seller-assisted financing
- Requests for payment for various services to be paid out of escrow funds
- Loan documents
- Tax statements
You're ready to close when every step is complete in escrow process. All outstanding payments and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then obtain the title to the property and the title insurance gets dispersed as noted in the escrow instructions.
At the close of escrow, fees are paid in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.
The Escrow Holder Will:
- Assemble escrow instructions
- Petition title inquiry
- Comply with lender's guidelines as specified in the escrow agreement
- Intake funds from the buyer
- Prorate interest, insurance, tax and other payments according to instructions
- Record deeds and other paperwork as instructed
- Request title insurance policy
- Close escrow when all terms of agreement of seller and buyer are complete
- Disburse funds and finish instructions
The Escrow Holder Will Not:
- Tell you what's best - the escrow holder must maintain a neutral, third-party status
- Offer opinions about future tax estimations
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The Escrow Holder Will:
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The Escrow Holder Won't:
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- Assemble escrow guidelines
- Request title inquiry
- Meet the bank's requirements as noted in the escrow agreement
- Receive payments from the buyer
- Prorate interest, insurance, tax and other payments according to instructions
- Record deeds and other legal documents as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer have been finished
- Disburse payments and finish instructions
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- Tell you what's best - the escrow company must stay at a fair, third-party status
- Give insight about tax implications
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Mortgage Escrow Account
Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.
Once you're at ease with the escrow process, you can be a better buyer.