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First-Time Home Buying: How To Close on a House
First, a little about "escrow". An escrow company is hired to assure your home closes on time and the process goes smoothly.
When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow.
For example, in a Web purchase, PayPal is the reliable third party that holds the buyer's cash, and then disburses the funds to the seller.
Tying up any loose ends like taking in funds, completing forms, obtaining the documents for loans and liens, and making sure you get a clean title to the house prior to your purchase gets finalized are all part of the job of the escrow company.
Escrow companies look for the following forms:
- 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
- Title insurance policies
You're ready to close when each step of the done in escrow process.
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 issued as noted in the escrow instructions.
The escrow holder receives a payment when the closing is complete.
You'll know when it's time to submit the form of payment.
The Escrow Holder Will:
The Escrow Holder Won't:
- Assemble escrow instructions
- Request title inquiry
- Meet the bank's guidelines as written in the escrow agreement
- Accept funds from the buyer
- Prorate insurance, tax, interest and other payments according to instructions
- Record deeds and other paperwork as instructed
- Request title insurance policy
- Close escrow when all instructions of seller and buyer have been met
- Disburse funds and finish instructions
- Give advice - the escrow agent has to remain an impartial, third-party status
- Dispense opinions about the outcome of your taxes
Mortgage Escrow Account
Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house.
Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.
Once you're comfortable with the escrow process, you can be a informed buyer.