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First-Time Home Buying: How To Close on a Home

 Metro Properties can walk you through closing - 800-252-6633
Escrow: When you're closing on your new home, a neutral, third party (known as the escrow holder or the escrow agent) is used to insure the process will close without problems and in a certain amount of time. A house is said to be in escrow when in the closing process, payment is secured by a third party on behalf of two parties when the transaction is taking place. An everyday way to understand the concept of what an escrow company does is to think of the use of PayPal for Internet purchases.

Tying up any loose ends like receiving funds, completing forms, securing the documents for loans and liens, and assuring you get a clear title to the house before your purchase gets finalized are all parts of closing in which an escrow holder is useful.

These are the pieces of paperwork that escrow holders usually compile:

  • 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 fees for inspections, title insurance and real estate commissions are collected. The house's title gets transferred to you and title insurance begins per the steps of your individual escrow agreement.

When closing is completely finished, you'll pay the fees to the escrow company. I'll keep you updated on what comes next.

The Escrow Holder Will:

  • Write escrow instructions
  • Perform a title search
  • Comply with lender's standards as specified in the escrow agreement
  • Intake 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 terms of agreement of seller and buyer have been met
  • Disburse payments and finish instructions

The Escrow Holder Will Not:

  • Tell you what's best - the escrow holder must stay at a fair, third-party status
  • Dispense opinions about the outcome of your taxes
The Escrow Holder Will:
The Escrow Holder Won't:
  • Prepare escrow guidelines
  • Petition title search
  • Comply with lender's requirements 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 paperwork as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are met
  • Disburse funds and finish instructions
  • Offer advice - the escrow company has to remain an impartial, third-party status
  • Dispense opinions about the outcome of your taxes

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 easy to understand guide about the escrow process. Your particular methods will be unique depending on your bank and your escrow holder.

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