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Buying Your Next Property: Closing
Let's talk about "escrow". When you're closing on your new house, an escrow holder is used to make certain the transaction will close appropriately and on time.
When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow.
For example, in an online auction, PayPal is the neutral third party that obtains the buyer's funds, and then hands over the payment to the seller.
The escrow company is careful to assure that all terms and conditions of the seller's and buyer's contract are performed prior to the sale being finalized. This includes securing monies and records, completing required forms, and seeking out the release documents for any loans or liens that were paid with the transaction, assuring you have a clean title to your home before the final price is fully paid.
Escrow companies compile the following pieces of paperwork:
- 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.
You'll then get the title to the home and the title insurance gets dispersed as noted in the escrow instructions.
The escrow agent receives a payment when the closing is complete.
You'll know when it's time to submit the form of payment.
The Escrow Holder Will:
The Escrow Holder Won't:
- Write escrow instructions
- Perform a title inquiry
- Meet lender's guidelines as noted in the escrow agreement
- Accept payments 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 instructions of seller and buyer have been finished
- Disburse funds and finish instructions
- Offer advice - the escrow company stays at an impartial, third-party status
- Give insight about future tax estimations
Mortgage Escrow Account
A Mortgage Escrow Account is used to make payments for on-going expenses while there is a loan on the house.
Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.
This is a easy to understand guide about the escrow process. Your specific plan might be different depending on your lender and your escrow holder.