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First-Time Home Buying: Closing
First, a little about "escrow". An escrow holder is hired to assure your place closes on time and the transaction goes smoothly. Escrow companies hold money for "safe-keeping" in a deal between a buyer and seller. An everyday way to understand what an escrow company does is to think of how you might use PayPal for Internet purchases.
Clearing the final hurdles like obtaining funds, finishing forms, securing the documents for loans and liens, and making sure you get a clean title to the house in preparation of your purchase gets finalized are all parts of closing in which an escrow holder is useful.
Escrow agents want to obtain the following legal documents:
- 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 done in escrow process. At this time, all payments and dues for inspections, title insurance and real estate commissions are collected. The property's title gets transferred to you and title insurance is issued per the steps of your particular escrow process.
The escrow agent gets a payment at the completion of closing. As your agent, I'll inform you of the acceptable form of payment.
The Escrow Holder Will:
- Write escrow guidelines
- Perform a title search
- Comply with the bank's requirements as noted in the escrow agreement
- Intake payments from the buyer
- Prorate insurance, tax, interest and other payments according to instructions
- Record deeds and other legal documents as instructed
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer have been met
- Disburse payments and finish instructions
The Escrow Holder Will Not:
- Give advice - the escrow agent must maintain a neutral, third-party status
- Offer opinions 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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- Write escrow guidelines
- Petition title research
- Comply with the bank's guidelines as noted in the escrow agreement
- Accept funds from the buyer
- Prorate insurance, tax, interest and other payments according to guidelines
- Record deeds and other legal documents as instructed
- Request title insurance policy
- Close escrow when all terms of agreement of seller and buyer are met
- Disburse payments and finish instructions
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- Advise you - the escrow holder has to remain an impartial, third-party status
- Give insight about the outcome of your taxes
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Mortgage Escrow Account
Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.
Once you have the ABCs of the escrow process down, you can be a informed buyer.