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First-Time Home Buying: How To Close on a Property
First, a little about "escrow". A neutral, third party (known as the escrow holder or the escrow agent) is hired to assure your house closes on time and the closing process goes smoothly.
When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow.
PayPal is a good example of an escrow company.
The escrow holder makes sure that the terms and conditions of the agreement between the seller and buyer are completed prior to the sale being finalized.
These are the records that escrow companies usually look to collect:
- 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
- Fire and other insurance policies
Upon completion of all portions of the escrow, closing can take place.
All expenses like title insurance, inspections and real estate commissions are paid.
You'll then secure the title to the property and the title insurance gets dispersed as stated in the escrow instructions.
When closing is finished, you'll pay the fees to the escrow company.
You'll know when it's time to submit the form of payment.
The Escrow Holder Will:
The Escrow Holder Won't:
- Assemble escrow instructions
- Petition title research
- Meet the bank's standards as specified in the escrow agreement
- Receive funds from the buyer
- Prorate insurance, tax, interest and other payments according to instructions
- Record deeds and other legal documents as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer are met
- Disburse monies and finalize instructions
- Offer advice - the escrow holder stays a neutral, third-party status
- Dispense opinions about future tax estimations
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.
This is a simple outline of the escrow process. Your particular methods might be slightly different based on your bank and your escrow agent.