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Buying Your Next Home: Closing
Escrow: When you're closing on your new property, an escrow agent is used to ensure the process will close properly and in a specific time frame.
A home is said to be in escrow when in the closing transaction, funds is secured by a third party on behalf of two parties (in this case, a buyer and a seller) when the transaction is taking place.
An everyday way to think of what an escrow company does is to think of the use of PayPal for online purchases.
The escrow company makes sure that the terms and conditions of the agreement between the two parties are performed prior to the sale being completed.
The records the escrow agent may collect include:
- 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
- Tax statements
Upon finishing of all instructions of the escrow, closing can take place.
At this time, all payments and dues for inspections, title insurance and real estate commissions are taken.
Title to the home is then transferred to you as buyer and appropriate title insurance is issued as outlined in the escrow instructions.
The escrow company gets a payment at the completion of closing.
I'll keep you up-to-date on what comes next.
The Escrow Holder Will:
The Escrow Holder Won't:
- Prepare escrow guidelines
- Perform a title search
- Comply with lender's guidelines as specified in the escrow agreement
- Receive funds from the buyer
- Prorate tax, interest, insurance and other fees according to instructions
- Record deeds and other documents as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer have been finished
- Disburse payments and finalize instructions
- Tell you what's best - the escrow company must maintain a neutral, third-party status
- Offer opinions about the outcome of your taxes
Mortgage Escrow Account
Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house.
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 simple outline of the escrow process. Your individual plan may be slightly different based on your lender and your escrow agent.