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Escrow 101
Escrow: When you're closing on your new home, a neutral, third party (known as the escrow holder or the escrow agent) is used to make certain the transaction will close without problems and in a timely manner. Escrow agents hold money for "safe-keeping" in a deal between a buyer and seller. PayPal is a good example of an escrow company.
Settling the last details like taking in funds, finishing forms, securing the documents for loans and liens, and making sure you get a clean title to the house in preparation of your purchase gets finalized are all part of the job of the escrow agent.
These are the pieces of paperwork that escrow agents usually look for:
- 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 all steps are finished in escrow process. All debts and fees are collected and paid off 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 issued as noted in the escrow instructions.
When closing is in it's last step, you'll submit a payment to the escrow agent. You'll know when it's time to submit the form of payment.
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The Escrow Holder Will: |
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The Escrow Holder Won't: |
- Prepare escrow guidelines
- Request title inquiry
- Comply with lender's requirements as outlined in the escrow agreement
- Accept payments from the buyer
- Prorate insurance, tax, interest and other payments according to guidelines
- Record deeds and other documents as instructed
- Request title insurance policy
- Close escrow when all terms of agreement of seller and buyer are complete
- Disburse monies and finalize instructions
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- Advise you - the escrow agent stays at an impartial, third-party status
- Give insight about the outcome of your taxes
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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.
This is a easy to understand guide about the escrow process. Your particular process will be slightly different based on your bank and your escrow agent.