10 Things to Know About Escrow for Buyers
Going into escrow can be a new and exciting experience for many homebuyers. Here are 10 things to know about escrow to help you navigate through the process. For more information, text or call Arminé Ghevian at (818) 389-4465.
1. Earnest Money
This is the money you give to the Seller showing that you are “serious” about purchasing the property; usually this is 3% of the purchasing price. By purchasing the home, you do not lose your deposit and it goes towards your downpayment and closing costs. If you back out of the sale then you may risk losing your deposit. That is why it is best to have a great real estate agent helping you make the right choices and protect your best interests. If you are buying a new build home you may also be required to hand over a separate second deposit. This deposit is typically nonrefundable as it is used to order your final touches and materials for your new home.
2. Home Inspection
I will ALWAYS recommend that you seek professional advise from a certified home inspector. The Seller must disclosure all known problems with the home. Although it is not rare for a home inspector to find issues the Seller was unaware of.
3. Getting Your Loan Approved
A pre-approval letter for a mortgage is exactly what it sounds like; it’s a pre-approval NOT a full approval. Until you actually have a full loan approval it is not a done deal. Typically the process for a full approval will take a few weeks during the escrow process. Be careful to not make any major purchases or run your credit until after escrow closes as this may affect your loan approval.
4. The House Gets Appraised
Lender’s will assign an appraiser to come to the home and determine its value. This is to protect their interest and make sure they are not loaning money to something worth much less than the loan amount. The appraised value with either come in at value, above value, or below value. If the appraised value is below the price you and the Seller agreed upon, then either one of three things will happen. You will either have to pay the difference between the appraised value and the agreed upon price, you renegotiate the price with the Seller, or you walk away from the Seller if you have an appraisal contingency in place.
5. Choosing Your Insurance Company
Your lender will likely require homeowners insurance and will oftentimes provide you with companies unless you decide to choose policies and companies yourself. Be sure to talk to your lender about their minimum requirements for the insurance policy.
Typically the Seller pays for this policy. Title companies first disclose all known facts about your rights to ownership on the property. Those facts are then insured. In all, this insurance protects you against unknown issues regarding ownership of your home.
This insurance protects your appliances including typically your air-conditioning, washer and dryer, etc.
6. Disclosures, Disclosures, Disclosures
There will be many disclosures, and even though it is a lot to read it is advisable you read them all very carefully. If questions arise, your real estate agent can help.
7. Read Your Closing Disclosure
This disclosure goes over your costs and what you will need to pay in the end. It is extremely important you review this carefully with your real estate agent and make sure everything is accurate.
8. Closing Time – Almost There!
This is when you will be advised to pay your down payment and other costs and sign all documents for the loan and transfer of property. Typically after you and the lender fund it will take one to two days for the County to record your deed. Only once the deed is put in your name are you a proud homeowner.
9. Post-Closing: Mortgage Escrow
Some lenders require this and others make it optional, and it is best to talk to your lender about the details of having an escrow account. These escrow accounts’ purpose is to allow you to pay your property tax and insurance monthly instead of in large payments twice a year. These accounts should not cost you anything.
10. Enjoy Your New Home
Congratulations Proud Homeowners!
I hope you enjoyed this list of 10 things to know about Escrow. For more information or if you have any questions, Text or Call Arminé Ghevian at (818) 389-4465 Today!