First-Time Home Buying: How To Close on a Home

Escrow
When you're closing on your new house, an escrow company is used to assure the transaction will close properly 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. For example, in an Internet purchase, PayPal is the reliable third party that holds the buyer's cash, and then disburses the money to the seller.

Clearing the final hurdles like taking in funds, completing forms, obtaining the documents for loans and liens, and making sure you a clean title to the house prior to your purchase gets finalized are all parts of closing in which an escrow company is useful.

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Escrow companies compile the following pieces of paperwork: 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 completion of all instructions of the escrow, closing can take place. All expenses like title insurance, inspections and real estate commissions are paid. The house's title goes to to you and title insurance is issued per the policies of your individual escrow process.

When closing is done, you'll make a payment to the escrow holder. You'll know when it's time to submit the form of payment.

The Escrow Holder Will:		The Escrow Holder Won't:
Write escrow guidelines Petition title research Meet lender's standards as outlined in the escrow agreement Intake funds from the buyer Prorate interest, insurance, tax and other payments according to instructions Record deeds and other documents as instructed Request title insurance policy Close escrow when all terms of agreement of seller and buyer have been met Disburse monies and finish instructions		Tell you what's best - the escrow company must stay at a fair, third-party status Offer opinions about the outcome of your taxes

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.

Once you have the ABCs of the escrow process down, you can be a informed buyer.