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Steps to Closing on a House

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First, a little about "escrow". When you're closing on your new house, an escrow agent is used to ensure the transaction will close without problems and on time. A house is said to be in escrow when in the closing process, money is secured by a third party on behalf of two parties (in this case, a buyer and a seller) when the transaction is taking place. A simple way to think of what an escrow company does is to think of how you might use PayPal for Internet purchases.

Tying up any loose ends like receiving funds, signing forms, securing the documents for loans and liens, and making sure you get a clean title to the property prior to your purchase gets finalized are all parts of closing in which an escrow holder is useful.

These are the legal forms that escrow holders usually look to collect:

  • 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
  • Terms of sale and any seller-assisted financing

Closing on the house takes place when the steps of the escrow are finished. All expenses like title insurance, inspections and real estate commissions are paid. The property's title goes to you and title insurance begins per the steps of your individual escrow agreement.

When closing is in it's last step, you'll pay the fees to the escrow agent. As your agent, I'll inform you of the acceptable form of payment.

The Escrow Holder Will:

  • Prepare escrow guidelines
  • Request title search
  • Comply with the bank's requirements as specified in the escrow agreement
  • Accept funds from the buyer
  • Prorate interest, insurance, tax and other payments according to guidelines
  • Record deeds and other legal documents as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer have been finished
  • Disburse monies and finalize instructions

The Escrow Holder Will Not:

  • Give advice - the escrow agent stays a neutral, third-party status
  • Dispense opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow guidelines
  • Request title research
  • Comply with the bank's guidelines as written in the escrow agreement
  • Receive payments from the buyer
  • Prorate interest, insurance, tax and other payments according to instructions
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer have been finished
  • Disburse funds and finish instructions
  • Tell you what's best - the escrow company stays a neutral, 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. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

Once you have the basics of the escrow process down, you can be a confident buyer.

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