Feeling underprepared to purchase a home isn’t uncommon. There are so many aspects that just aren’t discussed enough in the preparation. Getting familiar with the whole process from earnest money to closing is important. Boundary Title & Escrow, a title company in Huntsville, AL, is helping you understand the ins and outs of home buying. We’ve put together your guide to title and escrow.
Your Guide To Title And Escrow
Let’s start with a question — What Is Escrow?
When you are “in escrow” it is the period between an offer being accepted and actually getting the keys. An “escrow account” is where the money is held to complete the transaction and pay attorneys, inspections, and things like that. This payout is dependent on closing on a home.
The Escrow Process
There are a few required steps when in escrow. Any one of these steps being delayed can push back the closing date determined in the real estate contract or could even be a basis for the buyer or seller to pull out of the deal.
1. Open An Escrow Account
Your real estate agent will assist you in opening an escrow account. This account is managed by a third party to hold all funds necessary to close on the home and get the keys.
Boundary Title & Escrow is a great choice in the Huntsville, AL area because we offer everything you need to get to the closing table.
2. Get A Home Appraisal
Often, a bank will only lend an amount of money that the house is worth. An appraiser will go inspect the home to determine this amount. If the home appraises for less than the listed price, the buyer will need to cover the additional cost or negotiate with the buyer to lower the price.
The bank will pick the appraiser, but the buyer pays for it through the escrow account. If the home isn’t appraised for as much as the listed price and negotiation isn’t possible, the buyer may back out of the deal.
3. Get Financing For The Mortgage
If the home appraises for a reasonable price, the next step is to actually secure the financing. The best home buyers get pre-approved for financing. Remember that pre-qualifying and pre-approval are not the same. The mortgage lender will provide a Good Faith Estimate that will include closing costs. This is the amount that you will want to make sure you have in your escrow account to be able to get the keys to the home.
4. Review and Approve Seller Disclosures
You should get a list of obvious, known problems that may have already been mentioned by the seller or seller agent. Issues that would normally be on this list may have been included in the MLS listing.
5. Get A Home Inspection
This isn’t a required step but is in the buyer’s best interest. The home inspection may include checks for termites, environmental toxins like mold, or other things. A land survey to check the property boundaries may also be a good idea if they aren’t obvious.
6. Get Homeowner’s Insurance
Lenders will typically require you to have a certain level of homeowners and hazard insurance before getting to the closing table. The homeowner’s policy must be maintained for the length of the mortgage loan term. If you refinance at any time, a new policy will be required for the new loan.
7. Get A Title Search and Insurance
This may be our favorite step in the process! Boundary Title & Escrow will perform a thorough title search for you. We will look for any liens or claims on the property that may prohibit you from becoming the owner. We will also confirm that the person selling the home is the proper owner. If there are issues like overdue HOA fees, the seller will be responsible for clearing them up before closing.
On top of the title search, we can provide title insurance. This guarantees that you have coverage in case something comes up against the title in the future. This coverage often covers court costs to get any issues fixed.
8. Take A Final Walk-Through
You will want to walk around and check that any new damages haven’t occurred during the escrow process and that any repairs were actually completed. If the purchase agreement stated that things like appliances, fixtures, or window coverings be left, confirm that they actually were. This step is pretty far in the process so a buyer may not be able to back out at this point without losing money.
9. Review The HUD-1 Form
Remember the Good Faith Estimate that your lender gave you early on in the process? This HUD-1 form will be a detailed, itemized list of all the costs they estimated. The amount due at closing should be within 10% of what the estimate was. Look for unnecessary charges, errors, or unexpected fees.
10. Close Your Escrow Account
If you have made it this far, it is time to close on your new home. This is often referred to as “getting to the table” because you will actually sit down with attorneys and the seller to sign a stack of paperwork. An escrow officer from Boundary Title & Escrow will be present and will write up a new deed with the buyer’s name. Fees will be paid for the attorneys, inspections, appraisals, and down payment from your escrow account. Once complete, you will take possession of the keys.
Home Titles & Title Insurance
We talked a little about titles and title insurance. What exactly is this?
A title shows lawful ownership of a property. Pretty simple. Title insurance protects the lawful owners or lenders against any liens or claims that may come up. This insurance can cover damages sustained like court fees.
Title Insurance Costs
Title insurance is often a one-time premium paid at the time of closing. Unless explicitly stated in your real estate contract, it is typical in Alabama that buyers and sellers split the costs of title insurance and attorney fees. The cost of title insurance is based on the purchase price and loan amount. Your real estate agent and title coordinator can help navigate the title process.
Working With Boundary Title & Escrow
Get the best title and escrow service in Huntsville, AL with Boundary Title. When working with a real estate agent, simply request that Boundary Title & Escrow be your title company to get started and put your escrow account in good hands.
This material is provided as a courtesy and for educational purposes only. Please consult your title professional for specific information regarding your situation.