16 steps you need to know after escrow is opened.
Viewing one house after another; weeks, or even months of searching; you have finally found your dream home!
Your offer gets accepted and now escrow is opened. So what is next?
Below are the steps that will typically happen throughout the process. Because every transaction is different, and every state may have its own rules and customs, be sure to check with the professionals you are working with about your specific situation.
Step 0 — Opening escrow
The phrase “open escrow” gets tossed around quite often when you buy a house. To me, it means something great is about to happen — you are one step closer to homeownership.
So, what is it?
When you and the seller reach a mutual agreement and have a binding purchase contract, your agents will work together and provide the information to an escrow company to start the buying process.
An escrow company is a neutral third party who collects the funds and documents involved in a transaction, from open to close. In some states, it may be an attorney who handles this part of the transaction instead of the escrow company.
The escrow period is typically (not always) 30 days, and it is something you can negotiate with the seller during the negotiation stage. Some buyers may shorten this period as a tactic to show competitiveness.
Step 1 — Mortgage loan submission
I am beginning this step, assuming you were already pre-approved by a mortgage loan advisor before starting your house hunting.
Now is the time to provide your updated financial documents to your mortgage advisor to get the loan submission started.
Your loan officer will send you a set of initial loan application forms and disclosures for your signatures. It will contain an important document called the Loan Estimate. This document gives you a good idea of what the estimated fees and estimated cash-to-close will be.
In the meantime, you should discuss, with your loan advisor, the current interest rate and rate lock strategy.
Typically, you will have 21 days to secure financing before your loan contingency period ends.
Step 2 — Earnest money
Most sellers will require you to deposit the earnest money within three days from the offer acceptance date. You can either send a check or wire the funds to the escrow company.
Because this is often a sign to all parties that you are serious about proceeding, it is better to do this as soon as possible. Some vendors may only work on your transaction after the earnest money is deposited.
Be sure your funds are from a verified account — an account reviewed by your mortgage loan advisor. If you are unsure which account to use, clarify with your him/her before depositing the funds.
To avoid complications with your lender, avoid having large deposits (over 50% of your monthly salary) or withdrawals from your verified account before and during the loan application process.
Step 3 — Home inspection
Usually, your realtor will guide you through this process and can refer you to a trusted inspector. An inspector is a certified professional who evaluates the condition and safety of the house.
If the inspection report reveals defects, you and your realtor can strategize on renegotiating terms with the seller. Renegotiation could look like requesting repairs and/or seller credit to cover the cost of repair.
In some cases, you may decide to back out of the offer if the condition of the house, post-inspection, really does not work for you; given your inspection contingency is still in place, which is typically 17 days.
Step 4 — Appraisal inspection
As soon as you sign the initial loan application forms and disclosures from the lender, most mortgage loan advisors will place the appraisal report order right away.
This report is used to help your lender know the market value and condition of the house. The appraiser will also point out if the house is not up to code and if it needs any repair.
The appraisal contingency is usually 17 days.
Step 5 — Homeowner’s insurance policy
In most situations, lenders will require a valid home insurance policy before they can finalize your loan. While waiting for the conditional loan approval, you can use this time to shop for the right insurance policy. You will only have to provide the insurance quote to your escrow company or mortgage loan advisor; they will handle the rest of the request for you.
Step 6 — Conditional loan approval
Once your loan is conditionally approved by the lender, your mortgage loan advisor will reach out to you for the documents requested from the underwriter (the person who approves or declines your loan). For example, a letter of explanation for credit inquiries, updated paystubs, etc.
Your goal is to work closely with your mortgage loan advisor to clear all conditions promptly and reach “clear-to-close” — the closing stage where all major conditions are signed off.
Step 7 — Disclosures from seller
The seller will provide you with a list of known defects or issues within the property. Once you review the seller disclosures with your agent, you must sign and return the document to the seller.
In California, the seller will also provide the Natural Hazards Disclosure (NHD) report which will outline any wildfire, flood, or earthquake danger to the home.
Step 8 — Escrow package
The escrow company will send you an escrow package that includes, but is not limited to, the Escrow Instruction, Purchase Agreement, Vesting Worksheet, Preliminary Change of Ownership Report, Fire Insurance Information Form, and Statement of Information.
You should complete and return this package to escrow promptly to avoid any delay.
Step 9 — Preliminary title report
The preliminary title report will be provided to you by the escrow company as well. It is a report prepared prior to issuing the title insurance policy. It includes important information about the subject property, such as the names of titleholders, property description, encumbrances (mortgages, liens, judgments, etc.), and more.
Step 10 — Homeowner association (HOA) docs
If the property is managed by a homeowner association, you will receive a set of HOA documents. These documents will provide information such as the HOA fees, rules, and possible assessments of the house and community.
It is important to go through these and discuss with your realtor if you have any concerns.
In some cases, these documents are part of the conditional loan approval and need to be approved by the lender as well.
Step 11 — Termite report and termite clearance (if included on the purchase agreement)
If these are included in the purchase agreement, the seller will arrange a termite inspection and you will receive a termite report that discloses whether there are any termites or other wood-destroying pests issues.
Termite clearance is required by the lender if the termite report comes out with termite problems.
Step 12 — Closing Disclosure
Before, or when you reach clear-to-close, you will receive a document from your lender called the Closing Disclosure. It is a document that provides details of the loan terms and closing costs.
Although there may still be small adjustments on the costs, it is vital to understand this document thoroughly. If it looks different from what you expected, be sure to ask your mortgage loan advisor.
Your lender is required to deliver the Closing Disclosure to you prior to signing the loan documents. Once you acknowledge receipt of the disclosure, there is a three business day waiting period before you can sign the loan documents.
The intention of the waiting period is to give you time to review this document and raise any concerns you might have.
Step 13 — Clear to close and signing
Hooray! You are almost at the finish line! The lender has signed off on the majority of the conditions.
Your escrow officer will reach out to you to confirm the date and time for signing the loan documents. While a lot of states allow online notarization, some states (including California) still do not allow it. During this time, where it is best to avoid traveling, make sure you work with your mortgage loan advisor to make the best plan for notarization.
All buyers (not just borrowers) will have to be present for the signing.
Step 14 — Final walkthrough
Before closing, you will have the chance to do a final walkthrough. Make sure everything is in order and the house is in the condition previously agreed upon. If the seller agreed to any repairs, make sure they have been completed.
Step 15 — Wire funds to escrow
Your escrow officer will let you know the correct amount for the wiring. Some lenders require that funds must come from a verified account. When in doubt, always check with your mortgage loan advisor on which account to use.
Beware of wire fraud. It typically starts with an email.
Here’s an example:
A borrower receives an email from the escrow officer or realtor about a last-minute change in wiring instructions. However, it is really a scammer who hacked into the sender’s email account and changed the recipient’s bank account information. The funds end up being wired to the scammer’s account instead of escrow.
Always get your wire instruction verbally from your escrow officer. Escrow companies rarely change wire instruction.
Step 16 — We close!
This is the final stage.
Your lender funds the loan, the title company records the deed, and your realtor hands you the keys.
Congratulations, the house is yours! It is time to pop the champagne and celebrate.
While doing that, remember to set up utilities (electrical, plumbing, heating, garbage, etc) and change your mailing address, homeowner!
(Edited by Acayla Rushing)
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Disclaimer: All information provided is for informational purposes only and does not constitute professional advice. Please contact an independent professional for advice regarding your specific situation.