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Escrow: When you're closing on your new house, an escrow holder is used to make certain the transaction will close correctly and in a specific time frame.
When payment is held by a third party in a transaction between a buyer and a seller, it's in escrow.
A simple way to understand what an escrow company does is to compare it to PayPal for Internet purchases.
Tying up any loose ends like obtaining funds, finishing forms, securing the documents for loans and liens, and making sure you get a spotless title to the house in preparation of your purchase gets finalized are all part of the job of the escrow holder.
These are the legal documents that escrow agents usually compile:
- 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
Closing on the house takes place when the steps of the escrow are done.
All debts and fees are taken and paid at this time (covering expenses such as title insurance, inspections, real estate commissions).
You'll then get the title to the house and the title insurance gets dispersed as agreed upon in the escrow instructions.
At the close of escrow, payments of funds are made in an acceptable form to the escrow.
We'll keep you updated on what comes next.
The Escrow Holder Will:
The Escrow Holder Won't:
- Assemble escrow instructions
- Request title inquiry
- Comply with lender's standards as specified 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
- Obtain title insurance policy
- Close escrow when all terms of agreement of seller and buyer have been finished
- Disburse funds and finish instructions
- Advise you - the escrow company has to remain an impartial, third-party status
- Dispense opinions about future tax estimations
Mortgage Escrow Account
A Mortgage Escrow Account is established to make payments for rolling expenses while there is a loan on the house.
Though most home buyers make payments via their monthly mortgage payment, Escrow Accounts are deposited into at closing as well.
Once you have the ABCs of the escrow process down, you can be a confident buyer.