Things To Know On Escrow Requirements And Processing
Purchasing a property can be overwhelming for some people because of the tedious and lengthy processes involved. There are multiple stages involved when buying or selling property, starting from identification of suitable offer, an inspection of the home, and obtaining mortgage approval. One of the difficult parts to be grasped by many potential buyers is about the escrow requirements and processing. The process starts with the seller accepting the offer to the presentation of the keys to the new property. Here are the basic facts on escrow requirements and processing.
The first thing in the escrow process starts with the account opening where the deposit will be held. As a buyer, you must wait for the approval from the bank, get the needed financing, complete the inspections, buy hazard insurance, and finally handle the closing. The buyer has the right to walk away from the agreement if the conditions are not sufficiently met or if there is a problem with the particular property.
When you have agreed with the property seller on the price and sign an acceptable agreement, your hired real estate agent will collect the money as a good faith deposit, which will go to become a down payment. This amount is deposited in the escrow account. The escrow account is at the escrow company or a pre-specified service. The escrow account is controlled by an outside party who will hold the valuables such as property deeds, money, and personal finance documents for the two parties until pre-defined conditions are met.
The escrow agent might be a title company whose specialty is real estate. Some people also prefer to use banks or other financial institutions and private individuals as escrow agents. The escrow company is neutral and will collect the stated documents and money that is involved in the closing process, which includes the loan documents, initial earnest money check as well as a signed deed. In some other instances, lawyers handle the process and perform all the tasks of an escrow company. When this happens, it is referred to as settlement and not escrow.
The next process is to await the bank’s mortgage approval. The bank or the lender offering the mortgage undertakes its appraisal of the house, which you will pay for as the buyer. This is done to protect the lender’s interests in case you fail to repay as agreed, and the bank will have to carry out a foreclosure of the property. When the appraisal comes in lower than the price offered, you might not get financing from the lender unless you can come up with the cash to bridge the difference, or the seller is willing to lower the property price to equal the appraised amount.
Securing financing is the next step. If you are already pre-approved for a mortgage when the purchase agreement was approved, you can then give your lender the address to the property. They will then come up with a good faith estimate or statement with all the details of the loan, and afterward, you get the money to pay for the property and close the escrow process.