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Buying Your Next Home: Closing
First, a little about "escrow". An escrow company is hired to assure your home closes on time and the transaction goes smoothly. A house is said to be in escrow when in the closing transaction, funds is held by a third party on behalf of two parties when the exchange of money takes place. A simple way to think of what an escrow company does is to think of how you might use PayPal for Internet purchases.
Settling the last details like taking in funds, finishing forms, securing the documents for loans and liens, and making sure you get a spotless title to the home in preparation of your purchase gets finalized are all parts of closing in which an escrow agent is useful.
The pieces of paperwork the escrow agent may collect include:
- 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
- Tax statements
Upon finishing of all portions of the escrow, closing can take place. At this time, all payments and dues for inspections, title insurance and real estate commissions are paid out. You'll then obtain the title to the property and the title insurance gets dispersed as agreed upon in the escrow instructions.
At the close of escrow, fees are paid in an acceptable form to the escrow. As your REALTORS, we'll let you know what is an acceptable way of paying.
The Escrow Holder Will:
The Escrow Holder Won't:
- Prepare escrow instructions
- Request title research
- Comply with lender's guidelines as written in the escrow agreement
- Intake payments from the buyer
- Prorate insurance, tax, interest and other payments according to instructions
- Record deeds and other paperwork as instructed
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer have been met
- Disburse monies and finalize instructions
- Give advice - the escrow agent has to remain an impartial, third-party status
- Dispense opinions about tax implications
Mortgage Escrow Account
Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at closing.
Once you have the rules of the escrow process down, you can be a better buyer.
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