Things You Should Know

Know what “escrow” is, and who’s dealing with it for you.

You will hear the term “escrow” quite a bit during the home buying process. So, what is escrow?

Escrow (or “settlement service”) describes the process of a third party (NorCal Escrow Solutions, Inc.) holding money or property in trust for another until certain conditions are met. An example is any amount given to your real estate agent to accompany your offer on a house. That money goes into an escrow account until you close. Likewise, the escrow agent holds your down payment and your lender’s loan proceeds in escrow until closing.

Know what is meant by “closing.”

Closing (or “settlement”) is the point where all the title research is completed, the mortgage loan is approved, and all the paperwork is ready to be signed and recorded. Once all of the documents have been signed, the funds disbursed and the deed and mortgage recorded, the transaction has “closed.” In most cases, after closing, the house is all yours.

You need title insurance to protect both yourself and your mortgage lender.

The purpose of title insurance is to protect you and your lender from defects in the title to your home. Your lender will require title insurance before your loan is funded. Without title insurance for yourself, your down payment and any equity created over time is at risk should title defects surface. And once you have title insurance, you are protected from title problems and claims against your property even if they do not surface for decades.

Title insurance is a one-time cost.

You don’t pay monthly or annual premiums to keep your title insurance – you pay it just one time, typically at closing. Then you’re covered for as long as you own your home.

What are closing costs?

Closing costs are all costs required to close the real estate transaction. They can include (but are not limited to) surveying fees, property taxes, title insurance premiums, escrow fees, real estate agent commissions, points, loan origination fees, private mortgage insurance (PMI), and the balance of your down payment.

Prior to closing, you should review your final closing statement or HUD-1 statement (whichever is in use in your area) to ensure that all the calculations are correct and that you have been given all the credit for deposits and other agreed upon buyer and seller credits. Also recheck all lender, title and escrow fees to make sure they are accurate.

What will happen during the closing process?

• You might do a final walk-through of the home.
• You’ll go to the closing location and show your picture ID to the escrow agent at NorCal Escrow Solutions, Inc.
• You’ll present your paid homeowner’s insurance policy, or proof that the premium has been paid.
• Your settlement agent will review the closing statement or HUD-1 statement with you, showing all items for which you have paid.
• You’ll get inspection reports and warranties.
• You’ll sign the mortgage, agreeing that if you don’t make payments to the lender as agreed, the lender is entitled to sell your property and apply the sale price against the amount you owe.
• You’ll sign a mortgage note, which is your promise to repay the loan.
• You’ll typically be given the title to the house in the form of a deed, signed by the sellers.
• You will be asked to sign a number of other documents required by your lender.
• The deed and mortgage will be recorded in the local courthouse or county recorder’s office, sometimes called the Registry of Deeds.
• You’ll get the keys to your house!

Resource: “Knowyourclosing.com”