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First-Time Home Buying: How To Close on a Home
Let's talk about "escrow". To close the sale of a home, a neutral, third party (the escrow holder) is employed to assure the process will close appropriately and on time. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. An everyday way to think of what an escrow company does is to think of how you might use PayPal for online purchases.
The escrow agent makes sure that all terms and conditions of the seller's and buyer's negotiated agreement are completed prior to the sale being finalized. This includes receiving monies and certificates, completing required forms, and seeking out the release documents for any loans or liens that are to be paid with the transaction, assuring you have a free title to your house before the agreed upon price is fully paid.
The documents the escrow holder may collect include:
- 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
- Loan documents
You're ready to close when each step of the finished in escrow process.All expenses like title insurance, inspections and real estate commissions are paid.The property's title goes to you and title insurance begins per the steps of your individual escrow agreement.
When closing is in it's last step, you'll make a payment to the escrow company. I'll keep you up-to-date on the next steps.
The Escrow Holder Will:
The Escrow Holder Won't:
- Write escrow guidelines
- Perform a title inquiry
- Comply with the bank's guidelines as written in the escrow agreement
- Intake payments from the buyer
- Prorate insurance, tax, interest and other payments according to guidelines
- Record deeds and other paperwork as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer are met
- Disburse monies and finish instructions
- Give advice - the escrow agent must maintain a neutral, third-party status
- Offer opinions about tax implications
Mortgage Escrow Account
Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house.Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.
This is an easy to understand guide about the escrow process. Your specific process may vary based on your bank and your escrow holder.
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