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

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Escrow: To complete the sale of a place, a neutral, third party (the escrow company) is brought into the picture to assure the transaction will close appropriately and on time. When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow. For example, in an Internet auction, PayPal is the reliable third party that holds the buyer's cash, and then hands over the funds to the seller.

The escrow company makes sure that the terms and conditions of the agreement between the two parties are reached in preparation of the sale being completed.

The certificates the escrow holder may collect include:

  • 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

You're ready to close when each step of the complete in escrow process. All expenses like title insurance, inspections and real estate commissions are paid. The property's title is given to you and title insurance is issued per the steps of your particular escrow process.

At the close of escrow, payment of funds shall be made in an acceptable form to the escrow. I'll keep you informed on what comes next.

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
  • Accept 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 monies and finalize instructions
  • Advise you - the escrow agent has to remain an impartial, third-party status
  • Give insight about tax implications

Mortgage Escrow Account

A Mortgage Escrow Account is started to pay on-going fees while there is a loan on the 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 simple outline of the escrow process. Your specific methods may be unique based on your lender and your escrow company.