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Steps to Closing on a House
First, a little about "escrow". When you're closing on your new home, an escrow company is used to insure the process will close correctly 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.
For example, in an online auction, PayPal is the neutral third party that obtains the buyer's funds, and then disburses the payment to the seller.
Tying up any loose ends like taking in funds, completing forms, obtaining the documents for loans and liens, and making sure you get a clear title to the property in preparation of your purchase gets finalized are all part of the job of the escrow company.
The pieces of paperwork the escrow agent may obtain include:
- 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
Closing on the property happens when all of the procedures of the escrow are complete.
All expenses like title insurance, inspections and real estate commissions are paid.
Title to the home is then given to you as buyer and related title insurance is issued as noted in the escrow policy.
At the close of escrow, payment of funds shall be 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:
- Assemble escrow guidelines
- Request title search
- Meet the bank's standards as outlined in the escrow agreement
- Receive payments from the buyer
- Prorate interest, insurance, tax 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 have been met
- Disburse payments and finish instructions
- Offer advice - the escrow agent stays a neutral, third-party status
- Offer opinions 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.
Once you're at ease with the escrow process, you can be a more assured buyer.
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