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First-Time Home Buying: How To Close on a House
Let's talk about "escrow". When you're closing on your new property, an escrow holder is used to ensure the transaction will close properly and in a specific time frame.
A property is said to be in escrow when in the closing transaction, payment is held by a third party on behalf of two parties when the exchange of money takes place.
PayPal is a good way to picture an escrow company.
The escrow holder makes sure that all terms and conditions of the seller's and buyer's agreement are reached prior to the sale being finalized. This includes getting funds and documents, filling out required forms, and obtaining the release documents for any loans or liens that have been cleared with the transaction, assuring you have a clear title to your place before the negotiated price is fully paid.
Escrow holders collect the following documents:
- Loan documents
- 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
Upon finishing of all portions of the escrow, closing can take place.
At this time, all payments and dues for inspections, title insurance and real estate commissions are taken.
The home's title goes to you and title insurance begins per the policies of your individual escrow process.
At the close of escrow, in an acceptable form to the escrow.
We'll keep you informed on the procedure.
The Escrow Holder Will:
The Escrow Holder Won't:
- Assemble escrow instructions
- Petition title research
- Comply with the bank's guidelines as written in the escrow agreement
- Receive payments from the buyer
- Prorate tax, interest, insurance and other fees according to instructions
- Record deeds and other legal documents as instructed
- Obtain title insurance policy
- Close escrow when all instructions of seller and buyer are met
- Disburse funds and finalize instructions
- Advise you - the escrow company stays a neutral, third-party status
- Dispense opinions 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.
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.
Now you know more about how to close on your future home. And, you can be a more informed home buyer and future homeowner.