Learn More About the Escrow Process

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First-Time Home Buying: Closing

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Escrow: When you're closing on your new house, an escrow company is used to make sure the transaction will close without problems and on time. Escrow companies hold money for "safe-keeping" in a deal between a buyer and seller. For example, in a Web purchase, PayPal is the secure third party that holds the buyer's funds, and then hands over the payment to the seller.

The escrow company makes sure that the terms and conditions of the agreement between the seller and buyer are completed in preparation of the sale being finalized.

These are the legal forms that escrow companies 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

You're ready to close when every step is complete in escrow process. At this time, all payments and dues for inspections, title insurance and real estate commissions are taken. You'll then obtain the title to the property 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:

Assemble escrow instructions
Perform a title inquiry
Meet lender's requirements as specified in the escrow agreement
Accept 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 instructions of seller and buyer have been finished
Disburse monies and finish instructions

The Escrow Holder Won't:

Give advice - the escrow company stays at an impartial, third-party status
Give insight about future tax estimations

The Escrow Holder Will:		The Escrow Holder Won't:
Assemble escrow instructions Perform a title inquiry Comply with lender's standards as written in the escrow agreement Intake payments from the buyer Prorate interest, insurance, tax and other payments according to instructions Record deeds and other paperwork as instructed Obtain title insurance policy Close escrow when all instructions of seller and buyer have been finished Disburse monies and finalize instructions		Tell you what's best - the escrow company must maintain a neutral, third-party status Offer opinions about tax implications

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. Usually, the home buyer makes a payment at closing and also makes regular deposits through their monthly mortgage payment to fund the Escrow Account.

Now you know more about how to close on your future home. And, you can be a better informed home buyer and future homeowner.