Congratulations on having your offer accepted!
The information in this article will help you become a little more knowledgeable with the escrow process.
We hope to answer some of your questions in advance and provide you with step-by-step information that will help clarify your part in this process.
How does the escrow process work?
What is an escrow?
An escrow is a neutral third party to the transaction by which the interest of all parties are protected.
After acceptance of your contract to purchase your home, the escrow becomes a depository for all moneys, instructions and documents pertaining to the purchase of your home.
The escrow is a depository for all moneys, instructions and documents necessary for the purchase of your home, including your lenders funds and documents for your new loan.
The escrow officer takes instructions based on the terms of your purchase agreement and your lenders requirements. The escrow officer can hold copies of your inspection reports and bills for the work performed, as required by your purchase agreement.
Other elements in the escrow include hazard insurance, title insurance and the grant deed from the seller to you.
Escrow cannot be completed until all requirements have been satisfied, and all parties have signed all of the escrow documents.
The Loan Process
What happens after I submit the loan application?
The lender will begin the qualification process, including verification of information submitted on the application and appraisal of the property value.
The lender will require that you obtain hazard/fire insurance on the dwelling. You will also want to obtain additional coverage for your personal property.
The lender may have additional requirements that will need your attention prior to close of escrow.
When do I sign escrow instructions and where do I do this?
What are escrow instructions?
Escrow instructions define all of the conditions that must occur before the transaction can be finalized.
Your escrow instructions represent your written statement to the escrow holder, protecting your interest.
After the escrow officer has prepared instructions and final documentation for signature, you’ll be contacted to schedule an appointment for signing. The signing is usually done at the title company.
At your signing, the escrow officer will explain all credits and debits. You’ll be advised of the amount of money needed for your down payment & closing costs. This check must be in the form of a cashier’s check.
The escrow officer provides an important function in the transfer of real property. In addition to preparing instructions and final closing papers, the escrow officer orchestrates the ordering and delivery of documents and funds necessary to close the escrow. The charge for this service is set out in your instructions.
Explanation of Charges
The cost of title insurance and escrow services is the obligation of either the buyer or seller, depending on the terms of the purchase contract.
For the home owner, a home owner’s policy is issued. Premiums are based on the sale price. The term is for as long as you are in your home. If there is a mortgage, then the lender also requires a policy to be is issued to the lender, based on the loan amount. The term is for the length of the loan. Remember, for future refinancing, the lender will require you to pay another pay loan policy.
Usually $10 per signature.
This is determined by the sale price.
All lending institutions require a buyer to purchase a full policy of fire hazard insurance on property based on loan amount or guaranteed replacement cost, as part of the closing costs. This payment is for the first year, in advance.
PEST INSPECTION FEE
$200 – $300 paid to a state licensed company. There may be other inspections you wish to perform. Speak to us regarding questions you may have.
Will very depending on lender; usually from 1% to 3% percent of loan amount.
TAX SERVICE FEE
Required by lender; an inspection of tax records to ensure payment.
Lenders require a field appraisal prior to loan commitment. Fees vary ranging from $400 – $500.
MOST lenders prorate interest on a 360-day per year and charge a full 30 days of interest per month. Partial months per-diem rate computed on 360 day year.
Confused About Who Pays?
Common Seller & Buyer Costs
|The SELLER can generally be expected to pay for:||The BUYER can generally be expected to pay for:|
Holding Title Chart
TENANCY IN COMMON
|Parties||Any number of persons (can be husband and wife)||Any number of persons (can be husband and wife)|
|Division||Ownership can be divided into any number of interests, equal or unequal.||Ownership interests cannot be divided.|
|Title||Each co-owner has a separate legal title to his undivided interest.||There is only one title to the whole property.|
|Possession||Equal right of possession.||Equal right of possession.|
|Conveyance||Each co-owner’s interest may be conveyed separately by its owner.||Conveyance by one co-owner without the other breaks the joint tenancy.|
|Purchaser’s Status||Purchaser becomes a tenant in common with the other co-owners.||Purchaser becomes a tenant in common with the other co-owners.|
|Death||On co-owner’s death, his interest passes by will to his devisees or heirs. No survivorship right.||On co-owners’ death, his interest ends and cannot be willed. Survivor owns the property by survivorship.|
|Successor’s Status||Devises or heirs become tenants in common.||Last survivor owns property in severalty.|
|Creditor’s Rights||Co-owner’s interest may be sold on execution sale to satisfy his creditor. Creditor becomes a tenant in common.||Co-owner’s interest may be sold on execution sale to satisfy creditor. Joint tenancy is broken, creditor becomes tenant in common.|
|Presumption||Favored in doubtful cases except husband and wife. (See community property).||Must be expressly stated and properly formed. Not favored.|
THIS IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. SPECIFIC QUESTIONS FOR ACTUAL REAL PROPERTY TRANSACTIONS SHOULD BE DIRECTED TO YOUR ATTORNEY OR CPA
COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP
|Only husband and wife.||Only husband and wife and only when interest is created on or after July 1, 2001.|
|Ownership interests are equal.||Ownership interests are equal.|
|Title in the “Community.” (Similar to title being in a partnership)||Title in the “Community.” (Similar to title being in a partnership).|
|Equal right of possession.||Equal right of possession.|
|Both co-owners must join in conveyance of real property. Separate interests cannot be conveyed.||Both co-owners must join in conveyance of real property. Separate interests cannot be conveyed.|
|Purchaser can only acquire whole title of community. Cannot acquire a part of it.||Purchaser can only acquire whole title of community. Cannot acquire a part of it.|
|On co-owner’s death, ½ goes to survivor in severalty. Up to ½ goes by will or succession to others. (Consult attorney with specific questions).||On co-owner’s death, decedent’s interest ends and cannot be willed. Survivor owns the property by survivorship.|
|If passing by will, tenancy in common between devisee and survivor results.||Last survivor owns property in severalty.|
|Co-owner’s interest cannot be seized and sold separately. The whole property may be sold to satisfy debts of either husband or wife depending on the debt. (Consult attorney with specific questions).||Co-owner’s interest cannot be seized and sold separately. The whole property may be sold to satisfy debts of either husband or wife depending on the debt. (Consult attorney with specific questions).|
|Strong presumption that property acquired by husband and wife is community.||Strong presumption that property acquired by husband and wife is community.|
What do I need to do before my appointment to sign the escrow papers?
Make sure you are aware of your lender’s requirements and that you have satisfied those conditions before you come to the title company to sign your papers. Your lender can assist you with this.
Be sure to order your hazard/fire insurance once your loan has been approved. Then call your escrow officer with the insurance agent’s name and phone number so they can make sure the policy complies with your lender’s requirements. If you do not have an insurance agent, call us for help.
Please bring either your valid drivers license/ID or passport with you to the title company. This is needed so that your identity can be verified by a notary public.
A CASHIER’S CHECK
Obtain a cashier’s check or certified check made payable to the title company in the amount indicated by your instructions. A personal check may not be accepted or may delay closing.
How should I vest title?
Decide how you wish to vest your title to your new home prior to appointment with the title company.
The chart above provides a summary of common options for information purposes only.
We suggest you contact your tax accountant or legal adviser if you have any specific questions.
What happens after the signing
What is an “Escrow Closing”?
An escrow closing is the culmination of the transaction, which signifies legal transfer of title from the seller to the buyer.
Usually the Grant Deed and Deed of Trust are recorded within one working day of the escrow’s receipt of loan funds. This completes the transaction and signifies the “close of escrow”. Once all the conditions of the escrow have been satisfied, the escrow officer advises you or us of the date your escrow will close and takes care of the technical and financial details.
When will I receive a deed?
The original deed to your home will be mailed to you by the County Recorder’s Office. This takes about six to eight weeks.
What’s next after you sign instructions?
After you have signed the necessary instructions and documents, the escrow officer will return them to the lender for a final review.
This review usually occurs within a few days and upon completion, the lender is ready to fund your loan.