You are a first time home buyer and you have found the home of your dreams. You are ecstatic because so far, everything is running smoothly. You are approved by your lender, you have the down payment they are requesting and the seller is willing to pay 3 percent of the closing costs.
You begin packing, yes you are moving into your new abode within a week or two. Then they throw a word at you that stops you dead in your tracks--escrow. You have never heard this before, and have no idea what it means. Well, you better learn fast and make sure you have the money to close it or you will be unpacking all those boxes sooner than you think.
Understanding Escrow
Escrow is a legal procedure meant to protect all parties involved: buyer, seller and lender. The third party can be an escrow company, an escrow agent or an attorney. They are given all funds, paperwork and documents in regard to the sale of the home, ensuring all contingencies--or stipulations--are met before the mortgage company releases the funds and the title of the home is signed over. The stipulations typically include the selling price, inspection of the home, and ensuring the title is clear.
Choosing an Escrow Agent
It is imperative that the right escrow agent is chosen; it can mean the difference between you closing the deal on your new home within 30 to 60 days, or a long, drawn out process that leaves your possessions in boxes for months.
Ask your friends and family if they can recommend a good escrow agent. It is important they return calls promptly, is courteous, and explains details in terms you can easily understand. They must be knowledgeable--this is perhaps the most important characteristic.
Make sure you take the time to interview your potential agent. Ask them about their experience in the industry, how may lenders they have worked with in the past and their experience with handling loan documents.
The Cost of Escrow
This is where you must be prepared. Escrow agents do not work for free. These agents charge a fee for each individual service, and this can be costly depending on how many services they are performing. Both you and the seller should split these costs, however, this needs to be decided before the escrow closing. For instance, the seller may pay for the title fee, while you pay for attorney fees. These fees vary according to the state you live in. บ้านมือสอง
Yet another cost associated with escrow, and perhaps your first introduction to it, is the earnest money deposit that comes with the offer you make. This is separate from your down payment, but goes into escrow right along with everything else. This deposit shows your serious about purchasing the house. This, too, varies. The average amount, though, is 1 to 3 percent of the sales price.
The Importance of Escrow
If you do not make sure you have the money for escrow, you can kiss your house goodbye. Unless escrow is opened and the agent can say, "Yes, every contingency of the contract has been met," there is no closing. There is one more very important part of this, though. The escrow agent is the person who releases the funds and documents to the lender.
Purchasing your first home is a complicated process, however, if you are prepared ahead of time for everything that comes your way, you can begin moving those boxes into your new home sooner rather than later.
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