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Steps to Closing on a House

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First, a little about "escrow". An escrow agent is hired to assure your home closes on time and the closing process goes smoothly. Escrow holders hold money for "safe-keeping" in an exchange between a buyer and seller. PayPal is a good way to picture an escrow company.

The escrow company makes sure that all terms and conditions of the seller's and buyer's contract are met prior to the sale being completed. This includes getting monies and paperwork, completing required forms, and seeking out the release documents for any loans or liens that were paid off with the transaction, assuring you have a clean title to your house before the negotiated price is fully paid.

Escrow companies collect the following pieces of paperwork:

  • 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
  • Loan documents

Upon completion of all instructions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. You'll then obtain the title to the house and the title insurance gets dispersed as agreed upon in the escrow instructions.

When closing is completely finished, you'll submit a payment to the escrow company. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

  • Assemble escrow instructions
  • Perform a title research
  • Meet lender's standards as noted in the escrow agreement
  • Receive funds 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 terms of agreement of seller and buyer have been met
  • Disburse payments and finalize instructions

The Escrow Holder Will Not:

  • Offer advice - the escrow holder must stay at a fair, third-party status
  • Offer opinions about tax implications
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow guidelines
  • Perform a title inquiry
  • Meet the bank's standards 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 finished
  • Disburse monies and finalize instructions
  • Give advice - the escrow company must maintain 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. 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.

This is a easy to understand guide about the escrow process. Your specific process might be different based on your bank and your escrow agent.

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