Understanding the Home Mortgage Loan Closing Process:
Escrow
As you go about the process of looking for a home to purchase,
the home or your dreams, and as you go about the process
of finding the most appropriate home mortgage loan, you
likely have questions. Many of your concerns and questions
likely center around the home mortgage loan closing process
-- which can seem complicated and confusing for many people.
Through this article you are provided with information
about the home mortgage loan closing process. This article
addresses what you need to know about the escrow that will
be a part of the whole home purchase and home loan financing
process.
Escrow -- Defined
In simple, layperson’s terms, the escrow is akin
to a deposit. The escrow is a payment that is made by the
buyer of real estate at the time the initial real estate
contract for sale is executed or signed. While the amount
of escrow payment vary from situation to situation, these
payments can be found to be in an amount from 3% to 15%
of the total purchase price of the real estate. In short,
escrow payments really can be in any amount to which the
parties to the real estate sales contract agree.
The Purpose of the Escrow
The purpose of the escrow is to protect the seller should
the buyer elect to back out on the deal made in the sales
agreement for an impermissible reason. When a real estate
sales agreement is entered into, the buyer must -- by definition
-- take the real estate off of the market. Therefore, the
escrow payment provides the seller with some protection
during this time period should the buyer back out of the
agreement without good cause as defined in the real estate
sales agreement.
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