Escrow Explained

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Escrow Explained

  1. 1. What is Escrow?<br />When finalizing the sale of a home, a neutral 3rd. party( the escrow holder;AKA Escrow office) is engaged to assure the transaction will close properly and on-time. The escrow holder insures that all terms and conditions of the seller’s and buyer’s contract are met prior to the sale being finalized, including receiving funds and documents, completing required forms and obtaining the release documents for any loans or liens that have been paid off with the transaction, assuring you clear title to the property before the purchase price is fully paid.<br />The documentation the escrow officer may be collecting includes;<br /><ul><li>Loan documents
  2. 2. Tax statements
  3. 3. Fire and other insurance policies
  4. 4. Terms of sale
  5. 5. Requests for payment for various services to be paid out of escrow funds.</li></ul>Upon completion of all instructions of the escrow, closing can take place.<br />All outstanding payments and fees are collected and paid at this time(covering expenses such as title insurance, real estate commissions etc.<br />Title to the property is then transferred from the seller and the appropriate title insurance is issued as outlined in the escrow instructions.<br />At close of escrow, payments of funds due by you shall be made in an acceptable form to the escrow holder, typically a Cashier’s Check.<br />What Escrow needs from the Buyer:<br /><ul><li>Your exact name, marital status and manner in which you wish to acquire title.
  6. 6. Name and address of your lender and name of your Loan Officer
  7. 7. Terms of your new loan; amount and interest rate.
  8. 8. Home owner’s insurance name, address and telephone # and the amt. to be written.
  9. 9. Tips for a successful closing
  10. 10. COMMUNICATIONS
  11. 11. Frequent communication with all parties involved, your loan officer, realtor and escrow officer is critical. It is extremely important to communicate any significant changes in your life, such as job changes, new car purchases and changes to your sales price, etc. as well as if your close of escrow date changes for any reason.
  12. 12. HOMEOWNER’S INSURANCE
  13. 13. Failure to secure Homeowner’s Insurance in advance of closing is a leading cause of delays in the mortgage process. Insurance should be secured as soon as possible before your scheduled closing date. It is no longer always possible to secure homeowners insurance at the last minute – be prepared to order this as soon as you can.
  14. 14. CHANGING JOBS
  15. 15. Your income is a crucial part of the puzzle when determining your ability to repay the loan. The underwriter looks at the stability of your job and should you change jobs during the loan process, it potentially could create some instability in your loan profile. Contact your Loan Officer prior to making any career changes.
  16. 16. DEBT
  17. 17. Paying off debt may sound like the right thing to do, but the additional liquid assets you have may have been a determining factor in your loan approval. Contact your Loan Officer before making any significant changes to you debt structure. Also avoid allowing payments to be late between now and closing.
  18. 18. PROVIDE DOCUMENTATION WHEN REQUESTED
  19. 19. Any delay in receiving requested information may postpone the approval and closing process. Provide all requested information in a timely manner.
  20. 20. LARGE PURCHASES
  21. 21. Your debts and cash reserves have already been assessed. Any changes to these could jeopardize your approval. Contact your Loan Officer prior to making any significant purchases.
  22. 22. AVOID MAKING PLANS TOO TIGHT
  23. 23. Try to allow a 5-7 day overlap between closing date and move date. If the closing date is moved for any reason, unbudgeted expenses could occur.
  24. 24. FINANCIAL RECORDS
  25. 25. Occasionally, your mortgage company will have to verify information from previous bank account statements or pay check stubs such as large deposits or bonus checks. Save all of these items during the loan process as well as the paper trails on any deposits that are not income, such as tax refunds or 401k loans.
  26. 26. When you pack, remember to keep all financial information in a convenient place. Do not put this information in storage or let movers take it.
  27. 27. ALLOW TIME TO GO TO THE BANK ON CLOSING DAY
  28. 28. The cashier’s check (or wired funds) for closing should be made out to the title company. Assuming your loan process went exactly as planned, you will receive your final closing figures from the title company 24 hours prior to your closing. If the title company does not have your final closing figure when you are ready to get the cashier’s check, they can give you an estimated amount for closing. It’s better to get a check higher than necessary if the amount is an estimate since the title company will reimburse you for the difference typically within a couple of days.

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