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First-Time Home Buying: How To Close on a Place
Escrow: To complete the sale of a house, a neutral, third party (the escrow company) is employed to assure the process will close correctly and on time.
When money is held by a third party in a transaction between a buyer and a seller, it's in escrow.
For example, in an online purchase, PayPal is the reliable third party that obtains the buyer's funds, and then hands over the funds to the seller.
Clearing the final hurdles like receiving funds, signing forms, securing the documents for loans and liens, and assuring you get a spotless title to the property prior to your purchase gets finalized are all part of the job of the escrow holder.
The pieces of paperwork the escrow company may collect include:
- Loan documents
- Tax statements
- 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
You're ready to close when all steps are complete in escrow process.
All expenses like title insurance, inspections and real estate commissions are paid.
The house's title goes to you and title insurance begins per the steps of your particular escrow agreement.
When closing is finished, you'll pay the fees to the escrow agent.
As your real estate agent, I'll inform you of the acceptable form of payment.
The Escrow Holder Will:
The Escrow Holder Won't:
- Assemble escrow instructions
- Petition title search
- Meet the bank's guidelines 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 paperwork as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer are met
- Disburse payments and finalize instructions
- Give advice - the escrow company stays at an impartial, third-party status
- Offer opinions about future tax estimations
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.
Now you know more about being in escrow. And, you can be a more confident home buyer and future homeowner.