When you are purchasing a home, or taking a new refinance home loan, your Escrow holder will be the center of your real estate transaction. That’s because Escrow is the central repository of the documentation, information, and funds needed for the purchase/sale agreement. The primary function of an escrow holder, like North Orange County Escrow, is to be a disinterested or neutral third party which is governed by the mutually agreed upon instructions provided by the principals (seller and buyer).
Your Lender will also be very important in the purchase or sale of a property. Lenders are, after all, the source or a large chunk of the purchase money! Lenders typically coordinate with the escrow holder to obtain documentation they require to process the loan, including:
- Copies of all contracts and agreements,
- Title reports and other reports and inspections,
- Insurance policies,
- Copies of funds deposited and
- Estimated and final closing statements.
The process of approving your loan has many steps so it is always wise to stay in touch with the Lender for updates on status of approval and loan requirements throughout the escrow. While keeping track of loan approval and/or loan requirements is usually something your real estate broker, mortgage loan broker and/or escrow officer will do, you should do your best to keep yourself in the loop at all times by staying in touch with your Lender. Remember—before the Lender can fund a loan and closing can occur, the buyer must satisfy all the loan requirements!
Over time, it has also become a regular practice for lenders to deposit their final loan documents and “closing instructions” in escrow for funding/closing the new loan. The Escrow holder will then make arrangements to obtain the signatures on the lender’s documents and return the documents to the new lender; keeping out the Deed of Trust which is forwarded to the title insurance company to be recorded with the rest of the transaction documents at closing.
Since the inception of RESPA (Real Estate Settlements Procedures Act, 2011), the coordination of escrow holder and lender has become increasingly more complex and important. The stated purpose of this Act is to provide consumers with a “Good Faith Estimate” of settlement and closing costs.
Since this may be the largest and most important loan you get during your lifetime, you should be aware of certain rights before you enter into any loan agreement. HUD.gov has provided the following MORTGAGE BORROWERS’ RIGHTS statement:
- You have the RIGHT to shop for the best loan for you and compare the charges of different mortgage brokers and lenders.
- You have the RIGHT to be informed about the total cost of your loan including the interest rate, points and other fees.
- You have the RIGHT to ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.
- You have the RIGHT to know what fees are not refundable if you decide to cancel the loan agreement.
- You have the RIGHT to ask your mortgage broker to explain exactly what the mortgage broker will do for you.
- You have the RIGHT to know how much the mortgage broker is getting paid by you and the lender for your loan.
- You have the RIGHT to ask questions about charges and loan terms that you do not understand.
- You have the RIGHT to a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance.
- You have the RIGHT to know the reason if your loan was turned down.
- You have a RIGHT to ask for the HUD settlement cost booklet “Shopping for Your Home Loan”.
For HUD’s settlement cost booklet and other helpful information about RESPA, visit HUD.Gov home page. For other questions, call (800) 569-4287.
Under the new Consumer Financial Protection Bureau, all things financing related are subject to regulations which impact the lender/escrow relationship significantly. More changes will take effect in 2015 that will impact the shape of new rules and loan documents/forms. Keep in close communication with your friendly Escrow Expert at North Orange County Escrow to keep your closing smooth during these changes.