All About Escrow!
At Arrowhead Title, we know that buying and closing on a house is a complicated, and often frustrating, process. If you have never purchased a home before, you may not be familiar with what an escrow account is. Several new home buyers may get to this stage in the process and feel confused or unprepared. Our team of title experts at the Lake of the Ozarks are here for you to make sure you are ready and knowledgeable about your escrow account. Keep reading to learn more and get your questions about escrow answered!
Wait, where is my money going?
During closing, something called an escrow account is set up in order to make sure both you (the buyer) and the seller are protected during the real estate transaction. Many times, an escrow fund is agreed upon and placed into this account as collateral, or a show of good faith, from the buyer.
The true purpose of an escrow account, however, is to collect and disburse funds for monthly and yearly bills (property tax and insurance payments) that must be paid on the home. The money in the escrow account goes to pay these bills so that you do not have to save separately for these expenses that go hand-in-hand with home ownership.
Do I have to have an escrow account?
An escrow account is usually required if the down payment on your home was less than 20%. Property taxes and insurance premiums are a few of the large expenses this account helps pay. You make one combined mortgage and escrow payment each month and your mortgage company will then deposit a portion into your escrow account to make those payments. When your property tax and insurance bills are due, they are paid on your behalf.
What does "Acceptable Minimum Balance" mean?
An escrow account needs to have enough money in it to pay for your property taxes and insurance, and sometimes these costs are higher than expected. To keep you prepared, your mortgage company requires that you always keep a minimum balance in the account. For most accounts, the minimum balance equals about two months of escrow payments. Some accounts have a smaller minimum balance. This additional amount in your account helps to cover increases in taxes and/or insurance that may occur.
How is my escrow amount determined?
Your mortgage company will estimate how much your taxes and insurance will cost over the next year. This number is based on your loan closing documents, taxing authority, and insurance company information. That number is then divided by 12 months and added to your monthly mortgage payment. An escrow account amount may be adjusted throughout the year, or after a yearly escrow analysis, to help determine if your account keeps the minimum balance required throughout the year.
Why did my escrow payment increase?
There are a few reasons your payment amount may have increased. In addition to changes in property taxes and/or insurance premiums, tax reassessments and insurance carrier changes may cause a change in your escrow amount. A due date change and fewer deposits than expected can also cause the payment amount to rise.
What is an escrow analysis?
As required by law, once a year your escrow account is reviewed. This is to make sure the escrow portion of your total monthly payment covers your property taxes and insurance premiums, while also maintaining the minimum balance your account must have. The statement includes a history of the activity on your account for that year and the expected activity for the next year.
When you place funds in escrow with Arrowhead Title, your funds are held in a secured, non-interest bearing trust Escrow Account until the transaction is completed. This ensures that your transaction is protected! During a real estate transaction, the escrow officer holds all the important documents and deposits while the buyer and seller work out the details. We make sure the closing goes smoothly and everyone gets paid appropriately. After the closing, we record the deed and title transfer that make the home officially yours.
Our Residential Real Estate Escrow Services include...
- Assuming impartial fiduciary responsibility for documents and funds related to the real estate transaction, as directed by the buyer and seller.
- Preparing escrow instructions and all documents related to the terms of the sale.
- Ordering title and tax searches
- Reviewing of all documents received in escrow and reviewing the lender’s conditions related to title and hazard insurance.
- Presenting all documents to the buyer and seller for approval and requesting the balance of the buyer’s funds for purchase of the property.
- Reviewing the proceeds from the lender and determining when the transaction will be ready to close.
- Recording the deed, deed of trust and other documents required to complete the sale.
- Preparing the final settlement statement, disbursing proceeds and paying off any existing obligations.
- Closing escrow and delivery of any statements, funds, and documents to appropriate parties.
- Residential Closing Services
Closing on a home is a lengthy process, but it is also incredibly exciting and rewarding when all is said and done and the property is officially yours. Arrowhead Title has the best real estate closing services at the Lake of the Ozarks, and we are here to make the process as easy and comfortable as possible. We work with you to make sure everything is accurate and all parties are holding up their end of the transaction. So, when you are ready to close on your new house and set up an escrow account, contact Arrowhead Title! We are here for you.