First-Time Home Buying: How To Close on a Home
Let's talk about "escrow". An escrow agent is used to assure your place closes on time and the process goes smoothly. Escrow holders hold money for "safe-keeping" in a deal between a buyer and seller. An everyday way to understand what an escrow company does is to compare it to PayPal for Internet purchases.
Settling the last details like obtaining funds, finishing forms, getting the documents for loans and liens, and assuring you get a spotless title to the house prior to your purchase gets finalized are all parts of closing in which an escrow holder is useful.
Escrow agents collect the following legal documents:
- 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
- Fire and other insurance policies
- Title insurance policies
Upon completion of all instructions of the escrow, closing can take place. All outstanding payments and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). The house's title gets handed over to you and title insurance begins per the policies of your individual escrow agreement.
At the close of escrow, payments of funds are made in an acceptable form to the escrow. I'll keep you informed on the procedure.
The Escrow Holder Will:
The Escrow Holder Won't:
- Prepare escrow instructions
- Request title search
- Meet lender's guidelines as noted in the escrow agreement
- Intake 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 complete
- Disburse payments and finish instructions
- Give advice - the escrow holder must maintain a neutral, third-party status
- Give insight about tax implications
Mortgage Escrow Account
Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.
Now you know more about how to close on your future home. And, you can be a smarter home buyer and future homeowner.