Escrow is one of those home buying terms that is thrown around a lot. Most people may know that it is the period between when an offer on a home is accepted and when you close on the home and officially own it. But, there is lot more to escrow than that. Do you really know everything that you need to know about escrow? If you are in the process of buying a home, you need to!
Escrow begins when you and the homeowner sign a contract with agreed upon terms and home price. When you put an offer on a home, you provide an earnest money check that is put into an escrow account that neither you nor the seller can access. The funds in your escrow account will be used to pay things like homeowners insurance and property taxes. As mentioned, escrow begins when you you’re your contract but before you sign your contract, be sure that there are clear contingencies in place for a variety of circumstances. These contractual conditions are important because they hold people responsible for upholding their end of the contract. This is important because if certain changes or repairs are requested, a homeowner has a pre-determined amount of time (typically during escrow) to complete the changes. If the changes are not completed before the end of escrow, you have the opportunity to back out of your contract.
While your home is in escrow (aka “under contract”), a few important things will occur. First, you will have the opportunity to hire a home inspector and have the home thoroughly examined to ensure you know everything you need to before closing on your new home. After the inspection, your mortgage lender will also want to have your home appraised. This is an important part of being in escrow because it tells the lender whether or not the home is worth agreed upon price. Finally, your home contract will go into underwriting. Underwriting is the final step in the escrow process before you are able to close on your home. During this step, the underwriter will review your contract and all loan documents to ensure that everything is in order. The length of the escrow period can vary significantly depending on the timeliness of completing each step and providing all necessary documentation but is usually between 30-50 days. When you begin the home buying process and get ready to put an offer on a home, speak to your lender about what to expect during escrow so that you have a full picture of what is happening and can anticipate what is needed to keep the home buying process as smooth as possible.