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Month: January 2015

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Understanding the Escrow Process

Understanding the Escrow Process

If you’ve ever purchased a home, you’ve encountered escrow: the period between the acceptance of your offer and deposit of your earnest money and the final closing of the buyer-seller-lender transaction. The escrow period can range from weeks to months—depending on the lender’s timetable and the desires of the seller and buyer—and can be a bit confusing if you don’t understand what’s going on. While you can always ask your real estate agent to keep you informed on your escrow’s progress, the following details may also help alleviate uncertainty.

The Parties Involved

Multiple parties are involved in the escrow process and include your real estate agent, the sellers’ real estate agent, your lender, a title agent and an escrow agent.

  • Your real estate agent is there to guide you through the process, much as the sellers’ real estate agent will do for them.
  • Your lender takes your mortgage application and verifies all the important details before putting it through underwriting.
  • The title company makes sure the title to the property you are buying is free of liens and judgments. It also issues title insurance to protect you and your lender from any future property claims or disputes.
  • The escrow agent serves as a neutral third-party officer. He or she coordinates the escrow process, ensures it follows the terms of the purchase contract, and handles all of the paperwork.

Basic Escrow Timeline

While the actual timeline of any escrow may change due to a variety of factors, the basic steps involved in the process are as follows:

  • A realtor submits the purchase and sale agreement to the escrow agent.
  • The escrow agent sends instructions to the buying and selling parties, requesting more information about the transaction if necessary.
  • The escrow agent contacts the title agent and asks for a title search on the property.
  • The title agent conducts a title search and notifies the escrow agent of any issues.
  • If there are title issues, the escrow agent will work to clear them from the title.
  • The lender sends the completed loan document to the escrow agent.
  • The escrow agent prepares a settlement statement that reflects the costs of the transaction including loan fees, escrow fees and title fees.
  • The escrow agent prepares other documents the parties will need at closing.
  • The escrow agent coordinates a closing date.
  • The buyer, seller, escrow agent (and sometimes the buyer/seller real estate agents) meet to sign the closing documents.
  • The buyer gives the escrow agent a money order for any transaction costs that are not included in the loan amount.
  • The escrow agent sends copies of the signed loan documents to the lender.
  • The escrow agent sends the deed or deed of trust to the title agent.
  • The lender reviews the documents and approves them.
  • The escrow agent communicates this approval to the title agent.
  • The title agent records the documents (this is when the transaction is officially closed).
  • The lender wires the funds for the property purchase to the escrow agent.
  • The title agent sends the escrow agent a recording number indicating he/she has recorded the documents.
  • The escrow agent disburses the purchase funds to the appropriate parties.
  • The escrow agent sends a final settlement statement to the involved parties.

The escrow process is best navigated by a licensed real estate professional who works with lenders, title and escrow agents on a regular basis. Few experts would advise that a homebuyer tackle it alone. Fortunately, I’m here to help! Give me a call if you have additional escrow questions or have been thinking about buying, selling or investing in real estate.

 

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Getting a Mortgage is About to Get Easier

Getting a Mortgage is About to Get Easier

 

Since the advent of the subprime mortgage crisis in late 2007, mortgage companies, banks and government-backed mortgage guarantors have tightened their lending standards. Many potential homebuyers and refinancers without the near-perfect credit and substantial 20 percent down payment (or equivalent equity) required, have had to kiss their dreams of home ownership or lower interest rates goodbye as a result. Fortunately, all of that is about to change.

 

Fannie Mae and Freddie Mac are lowering their down payment requirements.

These two government sponsored enterprises buy mortgages from the banks, credit unions and other financial institutions that make them. Doing so is a sizable investment, and to minimize their risk they require that the loans they purchase “conform” to specific guidelines. In an effort to make home purchases more affordable for first time and low-income homebuyers, they recently adjusted these rules to allow for the backing of mortgages with 3 percent down payments.

In order for the entities to consider the mortgages conforming, these loans must require private mortgage insurance, a minimum 620 credit score, and complete income, asset and job documentation. Additionally, borrowers receiving these loans must attend homeownership counseling.

Fannie Mae started backing loans that met the loosened requirements in December. Freddie Mac will begin purchasing them from lenders in March. They will include 15-, 20- and 30-year fixed rate options with a borrowing limit of $417,000.

Lenders are already responding favorably to the changes.

In a recent article by CNN Money, an official at Fannie Mae noted that the average credit score seen on approved loan applications has dropped slightly. He is seeing lenders making mortgage loans to borrowers with lower down payments as well. And according to a survey conducted by the Federal Reserve, 14 percent of senior loan officers report that their banks began loosening lending standards in the fall.

What does this mean for you? If you’ve been dreaming about buying your first home, moving up into a bigger home, or refinancing your current mortgage, it’s unlikely there will ever be a better time to do so—even if lenders have turned you down before. Contact your real estate and mortgage professionals today to explore your options and learn more about next steps.