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First-Time Home Buying: How To Close on a Property
Escrow: To close the sale of a property, a neutral, third party (the escrow company) is employed to assure the transaction will close correctly and on time.
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 when the exchange of money takes place.
An easy way to understand the concept of what an escrow company does is to compare it to PayPal for online purchases.
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 receiving payments and paperwork, signing required forms, and getting the release documents for any loans or liens that have been paid off with the transaction, assuring you have a free title to your place before the negotiated price is fully paid.
Escrow agents want to obtain 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 completion of all portions of the escrow, closing can take place.
All expenses like title insurance, inspections and real estate commissions are paid.
The house's title goes to you and title insurance begins per the steps of your particular escrow agreement.
At the close of escrow, payments of funds are made in an acceptable form to the escrow.
You'll know when it's time to submit the form of payment.
The Escrow Holder Will:
The Escrow Holder Won't:
- Write escrow guidelines
- Request title inquiry
- Comply with the bank's standards as written in the escrow agreement
- Receive payments from the buyer
- Prorate insurance, tax, interest and other payments according to guidelines
- Record deeds and other legal documents as instructed
- Obtain title insurance policy
- Close escrow when all instructions of seller and buyer are complete
- Disburse monies and finish instructions
- Give advice - the escrow company stays at an impartial, third-party status
- Dispense opinions about future tax estimations
Mortgage Escrow Account
A Mortgage Escrow Account is established to pay recurring fees while there is a loan on the house.
Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.
This is a simple outline of the escrow process. Your individual methods could be unique depending on your bank and your escrow holder.
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