Rules for Using an Escrow Company

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First-Time Home Buying: Closing

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Escrow: To close the sale of a house, a neutral, third party (the escrow company) is engaged to assure the transaction will close appropriately and on time. When funds are held by a third party in a transaction between a buyer and a seller, it's in escrow. PayPal is a good example of an escrow company.

The escrow agent makes sure that the terms and conditions of the agreement between the two parties are reached in preparation of the sale being finalized.

The records the escrow company may collect include:

Tax statements
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

Upon finishing of all portions of the escrow, closing can take place. All outstanding payments and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the house is then transferred to you as new owner and appropriate title insurance is issued as outlined in the escrow policy.

At the close of escrow, payment of funds shall be made in an acceptable form to the escrow. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:

Prepare escrow instructions
Petition title research
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 guidelines
Record deeds and other paperwork as instructed
Obtain title insurance policy
Close escrow when all terms of agreement of seller and buyer are met
Disburse monies and finish instructions

The Escrow Holder Will Not:

Tell you what's best - the escrow company has to remain an impartial, third-party status
Dispense opinions about future tax estimations

The Escrow Holder Will:		The Escrow Holder Won't:
Assemble escrow guidelines Request title research Comply with lender's guidelines as noted 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 instructions of seller and buyer have been finished Disburse funds and finalize instructions		Tell you what's best - the escrow company stays a neutral, third-party status Give insight about future tax estimations

Mortgage Escrow Account

Creating a Mortgage Escrow Account helps keep track of on-going expenses while there's a loan on your house. 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 being in escrow. And, you can be a better informed home buyer and future homeowner.

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