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First-Time Home Buying: How To Close on a Property
First, a little about "escrow". A neutral, third party (known as the escrow holder or the escrow agent) is hired to assure your home closes on time and the money exchanging part of closing goes smoothly.
A home is said to be in escrow when in the closing transaction, money is secured by a third party on behalf of two parties when the exchange of money takes place.
PayPal is a good way to picture an escrow company.
Tying up any loose ends like taking in funds, completing forms, getting the documents for loans and liens, and assuring you get a spotless title to the home prior to your purchase gets finalized are all part of the job of the escrow agent.
The certificates the escrow holder may secure include:
- 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
- Fire and other insurance policies
Upon completion 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 collected.
Title to the home is then given to you as new owner and correct title insurance is issued as noted in the escrow policy.
The escrow agent gets a payment when the closing is complete.
We'll keep you informed on the procedure.
The Escrow Holder Will:
The Escrow Holder Won't:
- Write escrow guidelines
- Request title search
- Comply with lender's standards 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 instructions of seller and buyer have been met
- Disburse funds and finalize instructions
- Advise you - the escrow holder stays at an impartial, third-party status
- Offer opinions about future tax estimations
Mortgage Escrow Account
Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created.
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 ABCs of the escrow process down, you can be a better buyer.