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What is Escrow?

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First, a little about "escrow". An escrow company is used to assure your house closes on time and the transaction goes smoothly. A house is said to be in escrow when in the closing transaction, funds is secured by a third party on behalf of two parties (in this case, a buyer and a seller) when the exchange of money takes place. PayPal is a simple way to think of an escrow company.

Settling the last details like obtaining funds, signing forms, securing the documents for loans and liens, and making sure you get a clean title to the property before your purchase gets finalized are all parts of closing in which an escrow company is useful.

Escrow companies compile the following pieces of paperwork:

  • Loan documents
  • 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

Closing on the house takes place when the steps of the escrow are done. All outstanding payments and fees are taken and paid off at this time (covering expenses such as title insurance, inspections, real estate commissions). The house's title gets transferred to you and title insurance begins per the steps of your individual escrow process.

When closing is in it's last step, you'll make a payment to the escrow company. I'll keep you up-to-date on the next steps.

The Escrow Holder Will:

  • Assemble escrow guidelines
  • Perform a title research
  • Comply with the bank's standards as written in the escrow agreement
  • Intake payments from the buyer
  • Prorate tax, interest, insurance and other fees according to guidelines
  • Record deeds and other legal documents as instructed
  • Obtain title insurance policy
  • Close escrow when all instructions of seller and buyer are met
  • Disburse funds and finish instructions

The Escrow Holder Will Not:

  • Give advice - the escrow holder stays at an impartial, third-party status
  • Dispense opinions about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Assemble escrow guidelines
  • Perform a title research
  • Meet lender's standards as written in the escrow agreement
  • Receive payments from the buyer
  • Prorate tax, interest, insurance and other fees according to guidelines
  • Record deeds and other paperwork as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer have been met
  • Disburse monies and finish instructions
  • Advise you - the escrow company stays a neutral, third-party status
  • Dispense 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. 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 simple outline of the escrow process. Your individual plan could be unique depending on your lender and your escrow agent.

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