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First-Time Home Buying: Closing
Escrow: An escrow company is used to assure your home closes on time and the process goes smoothly. 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 Internet purchase, PayPal is the reliable third party that obtains the buyer's payment, and then disburses the payment to the seller.
The escrow agent makes sure that the terms and conditions of the agreement between the two parties are reached in preparation of the sale being completed.
These are the pieces of paperwork that escrow companies usually look for:
- 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
- Terms of sale and any seller-assisted financing
You're ready to close when all parts are complete in escrow process. All expenses like title insurance, inspections and real estate commissions are paid. Title to the house is then given to you as buyer and related title insurance is issued as noted in the escrow instructions.
When closing is done, you'll make a payment to the escrow agent. We'll keep you up-to-date on the next steps.
The Escrow Holder Will:
The Escrow Holder Won't:
- Prepare escrow instructions
- Petition title research
- Comply with the bank's guidelines as noted in the escrow agreement
- Receive payments from the buyer
- Prorate interest, insurance, tax and other payments according to guidelines
- Record deeds and other paperwork as instructed
- Request title insurance policy
- Close escrow when all terms of agreement of seller and buyer have been finished
- Disburse payments and finalize instructions
- Offer advice - the escrow agent stays at an impartial, third-party status
- Dispense opinions about tax implications
Mortgage Escrow Account
Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.
This is a easy to understand guide about the escrow process. Your individual plan will be unique depending on your lender and your escrow company.