Questions and Answers on Escrow and Closing Costs

These questions and answers will hopefully give you information and more understanding entering into escrow either with a homeowner or for foreclosed or bank owned home in Las Vegas. This may answer some of your questions about the process of Escrow and Closing Costs.

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Question: What is escrow?

Answer: Escrow is when a third party holds money and documents for the buyer and the seller during a real estate transaction. Generally escrow began at the time the when buyer made an offer on the house in one part of the all important purchase agreement.

In the purchase agreement, the initial earnest money was given to a third party, an escrow agent or escrow company with instructions to hold until closing. The escrow agent will hold the deposit or earnest money and then hold the funds the bank is loaning the buyer.

The escrow agent will get the deed from the seller, ensure that the title is clear and arrange for the recording at the county on closing. The escrow agent also figures all the amounts of taxes and insurance and such to the day of closing owed by the seller and buyer and how they are dispursed. This itemized accounting statement of all the money and fees is referred to as a HUD-1.

Question: What is the closing date?

Answer:The closing date is the day papers are signed and the money is to change hands. The closing date is set up in advance in the purchase agreement and can be changed in advance if needed with the agreement of both buyer and the seller. The date of signing may not be the day you get your keys since all funds must be transfered and recording must be completed in order to release the keys to your new home.

Question: What should a home buyer be prepared for in closing costs for example?

Answer: There are many costs lumped together under closing costs and keep in mind that in a buyers market closing costs may be negotiated in the purchase agreement. These are just some possible closing costs for the sake of example. Breaking apart the basic types of closing costs may it a little easier.

There are three main areas, loan related costs, taxes and insurances. Under loan related types of closing costs you will see escrow charges for one, which are often 50/50 between buyer and seller and title exam. Other closing costs from your lender may be loan origination fee, points, application fee, administration fee, funding fee, processing, underwriting, wire transfer, lender fee, document preparation, courier fees and prepayment of interest from the time of funding to the time of first mortgage payment.

There are third party closing costs which will show up on your good faith estimate or GFE such as credit report fee, appraisal fee, home warranty, homeowner association transfer fees and inspection fees. The realtors commission for both the buyer and the seller are paid by the seller.

Under taxes area you can expect government fees such as county recording fees and any city, county or state transfer taxes required and the prepayment of property taxes.

With insurances your lender may require the prepayment of one year homeowners hazard insurance premium and private mortgage insurance or PMI. Another insurance on expected closing costs is title insurance.

How do I find the right lender?

Answer: Buying a home is one of the largest purchases you will make so get some good faith estimates from several lenders just like you would get several opinions from doctors before major surgery. Find out all the expected costs ahead of time to reduce stress and last minute closing surprises. You may want to get preapproved rather than simply prequalified for your home loan before you start seriously shopping to feel more comfortable about the closing on your home.

Find out how to save money on loan costs

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Feel free to ask us any questions and get the answers you need. Michael Ray is an experienced Las Vegas Real Estate Agent you can call today at (702) 501-1508.

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