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First-Time Home Buying: How To Close on a House
First, a little about "escrow". When you're closing on your new house, an escrow agent is used to insure the process will close correctly and in a timely manner.
When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow.
For example, in an online transaction, PayPal is the neutral third party that holds the buyer's cash, and then disburses the funds to the seller.
The escrow company is careful to assure that all terms and conditions of the seller's and buyer's agreement are reached prior to the sale being completed. This includes getting funds and certificates, filling out required forms, and obtaining the release documents for any loans or liens that are to be paid with the transaction, assuring you have a free title to your property before the negotiated price is fully paid.
These are the legal documents that escrow agents usually look to collect:
- 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 every step is finished in escrow process.
At this time, all payments and dues for inspections, title insurance and real estate commissions are taken.
You'll then secure the title to the property and the title insurance gets issued as stated in the escrow instructions.
The escrow agent gets a payment at the completion of closing.
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
- Perform a title search
- Meet lender's requirements as written in the escrow agreement
- Accept payments from the buyer
- Prorate interest, insurance, tax and other payments according to guidelines
- Record deeds and other documents as instructed
- Request title insurance policy
- Close escrow when all terms of agreement of seller and buyer are complete
- Disburse payments and finish instructions
- Give advice - the escrow holder stays a neutral, third-party status
- Offer opinions about future tax estimations
Mortgage Escrow Account
Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house.
Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.
Once you have the ABCs of the escrow process down, you can be a confident buyer.