Escrow and Closing Costs

What is escrow?

 Commonly used in real estate transactions, an escrow company holds money and documents between parties. As a neutral third party, the escrow company helps facilitate the homebuying and selling process.

How can I save on closing costs?

* Negotiate with the seller to pay all or part of the closing costs. The lender (and seller) must agree to this.  Keep in mind, this lowers the Sellers bottom line, so it in effect lowers your offer price.

* Get a no-point loan. The  trade-off is a higher interest rate on the loan, but buyers who are short on cash and can qualify for a higher interest rate may find a no-point loan will significantly cut their closing costs.

* Get seller financing. This kind of arrangement usually does not entail traditional loan fees or charges.

* Shop around for the best loan deal.  Each direct lender and each mortgage brokerage has their own fee structure. Call around before submitting your final loan application.

Who pays the closing costs?

Closing costs are usually paid by both parties, each paying their own incurred costs: the home seller or home buyer.  It can be negotiated by the buyer.

What are closing costs?

Closing costs are the fees for services, taxes or homeowners insurance or interest charges that surround the purchase of a home.  They include upfront loan points, title insurance, escrow charges, document fees, pre-paid interest and property taxes.  Unless, these charges are rolled into the loan, they must be paid when the home is closed.

Why do I need a title report?

As much as a buyer may want to believe that the home you have found is perfect, a clear title report ensures there are no liens placed against the prior owners or any  documents that will restrict your use of the property.  A preliminary title report provides you with an opportunity to review any impediment that would  prevent clear title from passing to you.  When reading a preliminary report, it  is important to check the extent of your ownership rights or interest.  The most common form of interest is "fee simple" or "fee," which is the highest type of  interest an owner can have in land.  Liens, restrictions and interests of others excluded from title coverage will be listed numerically as exceptions in the  report.  You also may have to consider interests of any third parties, such as  easements granted by prior owners that limit use of the property.  Some buyers  attempt to clear these unwanted items prior to purchase.  A list of standard exceptions and exclusions not covered by the title insurance policy may be attached.  This section includes items the buyer may want to investigate further,  such as any laws governing building and zoning.