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First-Time Home Buying: How To Close on a Home
Let's talk about "escrow". To finalize the sale of a house, a neutral, third party (the escrow agent) is brought into the picture to assure the process will close appropriately and on time. When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow. PayPal is a good example of an escrow company.
The escrow company makes sure that the terms and conditions of the agreement between the two parties are met prior to the sale being finished.
The pieces of paperwork the escrow agent may obtain include:
- 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
- Fire and other insurance policies
- Title insurance policies
Upon finishing of all instructions of the escrow, closing can take place. All payments owed and fees are collected and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). You'll then receive the title to the property and the title insurance gets issued as outlined in the escrow instructions.
At the close of escrow, payments are submitted in an acceptable form to the escrow. As your REALTOR, I'll let you know what is an acceptable form of payment.
The Escrow Holder Will:
- Prepare escrow guidelines
- Perform a title research
- Meet lender's requirements as specified in the escrow agreement
- Intake funds from the buyer
- Prorate tax, interest, insurance and other fees according to guidelines
- Record deeds and other paperwork as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer have been finished
- Disburse payments and finish instructions
The Escrow Holder Will Not:
- Tell you what's best - the escrow agent must stay at a fair, third-party status
- Give insight about the outcome of your taxes
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The Escrow Holder Will:
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The Escrow Holder Won't:
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- Prepare escrow guidelines
- Request title search
- Meet lender's guidelines as outlined in the escrow agreement
- Receive funds from the buyer
- Prorate interest, insurance, tax and other payments according to guidelines
- Record deeds and other legal documents as instructed
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer are met
- Disburse funds and finalize instructions
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- Give advice - the escrow holder must stay at a fair, third-party status
- Offer opinions about tax implications
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Mortgage Escrow Account
A Mortgage Escrow Account is started to make payments for rolling fees while there is a loan on the house. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.
This is a quick run-down of the escrow process. Your specific process could be different depending on your bank and your escrow agent.