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First, a little about "escrow". When you're closing on your new place, an escrow agent is used to insure the process will close appropriately and in a certain amount of time. Escrow agents hold money for "safe-keeping" in transactions between a buyer and seller. PayPal is a good way to picture an escrow company.

Clearing the final hurdles like receiving funds, finishing forms, getting the documents for loans and liens, and making sure you get a clear title to the property in preparation of your purchase gets finalized are all parts of closing in which an escrow agent is useful.

These are the legal forms that escrow holders 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

Upon finishing of all portions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. You'll then obtain the title to the home and the title insurance gets dispersed as stated in the escrow instructions.

The escrow agent gets 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 guidelines
  • Petition title research
  • Comply with lender's requirements as written in the escrow agreement
  • Accept payments from the buyer
  • Prorate tax, interest, insurance and other fees according to guidelines
  • Record deeds and other documents as instructed
  • Obtain title insurance policy
  • Close escrow when all terms of agreement of seller and buyer are complete
  • Disburse payments and finalize instructions

The Escrow Holder Won't:

  • Give advice - the escrow holder stays a neutral, third-party status
  • Offer opinions about future tax estimations
The Escrow Holder Will:
The Escrow Holder Won't:
  • Write escrow instructions
  • Petition title inquiry
  • Meet the bank's guidelines as written 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
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer are met
  • Disburse monies and finish instructions
  • Advise you - the escrow holder must stay at a fair, third-party status
  • Dispense opinions about the outcome of your taxes

Mortgage Escrow Account

Often, to pay recurring costs while there's a loan on the house, a Mortgage Escrow Account is created. 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 individual methods might be different based on your lender and your escrow holder.