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First-Time Home Buying: Closing

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Let's talk about "escrow". To finalize the sale of a place, a neutral, third party (the escrow holder) is employed to assure the process will close correctly and on time. A place is said to be in escrow when in the closing transaction, payment is secured by a third party on behalf of a buyer and a seller when the exchange of money takes place. An easy way to understand what an escrow company does is to compare it to PayPal for online purchases.

The escrow holder makes sure that the terms and conditions of the agreement between the two parties are reached in preparation of the sale being finalized.

These are the legal documents that escrow holders usually compile:

  • 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

Upon finishing of all instructions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. The home's title gets handed over to you and title insurance is issued per the policies of your particular escrow agreement.

The escrow agent gets a payment when the closing is complete. I'll keep you informed on the next steps.

The Escrow Holder Will:

  • Assemble escrow instructions
  • Petition title search
  • Meet lender's standards as specified in the escrow agreement
  • Accept payments from the buyer
  • Prorate tax, interest, insurance and other fees according to instructions
  • Record deeds and other paperwork as instructed
  • Obtain title insurance policy
  • Close escrow when all instructions of seller and buyer have been met
  • Disburse funds and finalize instructions

The Escrow Holder Won't:

  • Offer advice - the escrow company stays a neutral, third-party status
  • Dispense opinions about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow guidelines
  • Petition title research
  • Meet the bank's standards as specified in the escrow agreement
  • Intake funds from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other paperwork as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are complete
  • Disburse monies and finish instructions
  • Offer advice - the escrow company must stay at a fair, third-party status
  • Give insight 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. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.

This is a quick run-down of the escrow process. Your individual plan could be different depending on your bank and your escrow holder.

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