What is escrow and title insurance?
Escrow is simply the time period during which all the funds and documents that are related to the transfer of property are verified. This is where Title company becomes involved, acting as an independent third party for the buyer and seller, carrying out the instructions of both parties, assuming responsibility for distribution of funds, handling all paperwork, and recording the deed which transfer the title to you, the buyer.
Escrow protects all parties involved in the transaction. As an example, with a deposit, the buyer’s money is protected while the seller verifies the evidence that the buyer’ interest is in good faith. The Title Company holds all monies instructions and documents required for the transaction, distributes the appropriate amounts to each party, and handles details such as recording the new deed.
The Insurance is an insurance policy which protects the buyer against risks that can go undisclosed during a title search. Also known as “hidden defects”, these risks might not show up until several years later. Some examples are: undisclosed or missing heirs, impersonation of the true owner, forged signature on a deed or a deed and mortgage signed by persons of unsound mind, minors or supposedly single but actually married persons. Even in the event that hidden defects such as these occur, with Title Company you and your property will remain protected.
What are closing costs and do I pay them?
There are tow types of closing cost expenses: Non-recurring (you only pay once) and recurring (that repeat at certain intervals). Non-recurring costs include but are not limited to the following fees: Appraisal, credit report, points or loan origination, property inspection, title insurance and escrow, document preparation, tax service, notary, recording, courier, wire transfer and transfer stamps (County and city transfer taxes). Recurring costs and pro-rations include but are not limited to the following fees: Property hazard insurance, property tax, interest pro-ration, pro-rated first month’s payment and PMI (Private Mortgage Insurance) if applicable. Many of these costs are divided between the buyer and seller based on the custom of the County where your property is.
Your Lender and real Estate Agent/Broker will provide a “good faith estimate” of anticipated closing costs, and the actual costs will be summarized by the escrow holder in accordance with the lenders instructions, and will be explained to you at the time of signing.
Congratulations! You have taken the first step.
Here are 19 additional steps of this journey:
- Choosing your Real Estate Agent.
- Choosing your Lender (Know about different type of loans and pre-qualification)
- Selecting your home (Determine the type, price and the location)
- The Offer (Once you have found the property make a written offer through your real estate Agent)
- The escrow process (When you have reached an agreement with the seller, initial good faith deposit is given to an escrow representative the escrow process begins.
- The mortgage loan (A mortgage loan is requested filling out appropriate forms)
- Preliminary Title report (is reviewed and accepted)
- Inspections and disclosures (The property is inspected during the period specified in the contract, and all disclosures made by the seller about the property are reviewed)
- Assessment (The property value is determined by the lender)
- Loan approval (The lender contacts the escrow agent)
- Hidden defects insurance (The buyer tells the Escrow Agent the name of the insurance company that will grant the policy)
- Conditions (The escrow agent ensures that the conditions are met)
- Final visit to the property (The buyer inspects the property with the Real Estate Agent before closing the transaction)
- Document signing (the buyer signs the loan documents and escrow instructions and deposits the final payment with the title company)
- The escrow agent returns the documents to the lender
- The lender’s funds are electronically transferred to the title company (The monetary exchange occurs between the lender and the title company)
- The deed is registered at the County office (this transfers the property title to the buyer)
- The transaction closes (accounting is finalized and the account statement is remitted)
- The keys are delivered to the new owner
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