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First-Time Home Buying: Closing
Escrow: To finalize the sale of a home, a neutral, third party (the escrow agent) is engaged to assure the process will close appropriately and on time.
Escrow agents hold money for "safe-keeping" in a deal between a buyer and seller.
For example, in an online auction, PayPal is the secure third party that holds the buyer's money, and then hands over the payment to the seller.
Tying up any loose ends like obtaining funds, completing forms, obtaining the documents for loans and liens, and assuring you get a clear title to the house prior to your purchase gets finalized are all parts of closing in which an escrow company is useful.
The records the escrow agent may obtain 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 complete in escrow process.
All debts and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions).
Title to the home is then transferred to you as buyer and correct title insurance is issued as outlined in the escrow policy.
When closing is done, you'll pay the fees to the escrow agent.
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 research
- Comply with the bank's guidelines as outlined in the escrow agreement
- Intake funds from the buyer
- Prorate insurance, tax, interest and other payments according to instructions
- Record deeds and other paperwork as instructed
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer have been met
- Disburse funds and finalize instructions
- Tell you what's best - the escrow agent stays a neutral, third-party status
- Give insight about the outcome of your taxes
Mortgage Escrow Account
Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created.
Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.
Once you have the basics of the escrow process down, you can be a more assured buyer.