NMLS #337051

Understanding How Escrow Works

To finalize the sale of the home a neutral, third party (the escrow holder, a.k.a. escrow agent) is engaged to assure the transaction will close properly and on time. The escrow holder ensures that all terms and conditions of the seller’s and buyer’s agreement are met prior to the sale being finalized, including receiving funds and documents, completing required forms, and obtaining the release documents for any loans or liens that have been paid off with the transaction, assuring you clear title to your property before the purchase price is fully paid. The documentation the escrow holder may be collecting includes:

  • Loan documents
  • Tax statements
  • Fire and other insurance policies
  • Title insurance policies
  • Terms of sale and any seller-assisted financing
  • Requests for payment for various services to be paid out of escrow funds

Upon completion of all instructions of the escrow, closing can take place. All outstanding payments and fees are collected and paid at this time (covering expenses such as title insurance, inspections, real estate commissions). Title to the property is then transferred to the seller and appropriate title insurance is issued as outlined in the escrow instructions. At the close of escrow, payment of funds shall be made in an acceptable form to the escrow. As your real estate agent, I’ll inform you of the acceptable form.

The Escrow Holder Will:

  • Prepare escrow instructions
  • Request title search
  • Comply with lender’s requirements as specified in the escrow agreement
  • Receive funds from the buyer
  • Prorate insurance, tax, interest and other payments according to instructions
  • Record deeds and other documents as instructed
  • Request title insurance policy
  • Close escrow when all instructions of seller and buyer have been met
  • Disburse funds and finalize instructions

The Escrow Hoder Won't

  • Give advice – the escrow holder must maintain neutral, third-party status
  • Offer opinions about tax implications

Mortgage Escrow Account

A Mortgage Escrow Account is established to pay on-going expenses while there is a loan on the house. These expenses include property taxes, home insurance, mortgage insurance, and other escrow items. Generally, the Escrow Account is partially funded at closing and the home buyer makes on-going contributions through their monthly mortgage payment.

Understanding Closing Costs

“Closing Costs” are the fees that cover the various services involved in the sale of residential real estate. Buyers and sellers negotiate to decide how to share these costs.

As indicated below, many of the buyer’s closing costs are related to the costs of originating the mortgage loan. Since Dove Mortgage Corporation is highly experienced with closings and mortgages, we can help you understand your closing costs.

The Good Faith Estimate (GFE)

Buyers will receive a “Good Faith Estimate” of closing costs at the time the loan application is submitted to the lender. The closing costs enumerated in the GFE are estimated based on our experience with mortgage loans, but costs usually change by small amounts between the Good Faith Estimate (GFE) and closing. We go over Good Faith Estimates with buyers almost every day, so we’d be glad to answer the you have about closing costs.

Below you’ll find a generic list of costs for buying residential real estate. We will always provide a specific list of your closing costs when we provide your Good Faith Estimate.

Standard Closing Costs

  • Various Taxes
  • Loan-related costs
  • Points — lower your mortgage interest rate (optional)
  • Appraisal Fee
  • Obtaining Your Credit Report
  • Interest Payment
  • Escrow Account

Property Taxes

  • Recording Fees and Transfer Taxes
  • Insurance

Homeowners Insurance

  • Title Insurance
  • Flood / Earthquake Insurance
  • Private Mortgage Insurance (PMI)

Information Required on a Loan Application

What information will be needed for the application (and how it’s kept private)?

Anything you submit over our website is 100 percent, fully secure. And we never, ever share it with anyone except by permission — that is, if you’re giving us information you want us to use to get you the best loan, we use that information to tell mortgage lenders about you and convince them to loan you money. In turn, those mortgage lenders are bound by federal law to keep your information secure.

Here is a list of the information mortgage lenders will use to consider your loan application.

For all loans

  • Social Security Number, for borrower and co-borrower (if any)
  • Employment History
    • For the last two years, employment dates, addresses, salary.
    • Current pay stubs or W-2 forms.
  • Check and Savings Accounts and Certificates of Deposit
    • Location of bank accounts, account numbers and balances
    • Address of bank if out of town
    • Last 3 months’ statements
  • Stocks, Bonds, and Investment Accounts
    • Broker’s name and address, description of stocks, bonds, etc.
    • Last 3 months’ statements or copies of stock certificates
  • Life Insurance Policies
    • Insurance company, policy number, face amount, cash value, if any
  • Retirement Plan
    • Approximate vested interest value
    • Copy of latest statement
  • Automobiles
    • Make and model of automobiles, their resale value
  • Other Assets
    • Market value of personal and household property
  • Liabilities and Other Non-Mortgage Debt
    • Creditors names, addresses, account numbers
    • Monthly payments and balances

Other income information you may need

If you’re self-employed:

  • Two years tax returns, profit and loss statements, both company and personal if separate.
  • Current balance sheet and profit and loss statement if more than two months into the new fiscal year, signed by CPA.

If you have income from:

  • Commission
  • Overtime
  • Bonus
  • Partnership
  • Rental Property
  • Trust
  • Notes Receivable
  • Interest/Dividends
  • You’ll need two years’ personal federal tax returns

If employed in family business:

  • Personal federal income tax returns and all schedules for the past two years

If divorced or separated:

  • Complete executed divorce decree and settlement agreement
  • Payment history of alimony/child support over the past 12 months, if it is a financial obligation.
  • If you choose to have this be considered as part of your income (you don’t have to), be prepared to provide 12 months canceled checks or bank statements reflecting income deposits.

If you own real estate

  • Name and address of all mortgage lenders for the past 24 months, account numbers, monthly payments and balances
  • If you’ve sold your home but not closed: A copy of the sales contract
  • If you’ve sold your home, closed, and you will use the proceeds for your new down payment: A copy of the HUD-1 Uniform Settlement Statement

If you rent

  • Name, address and phone number of landlords for the past 24 months

If you’re buying a home

  • Purchase sales contract or offer to purchase and all addenda
  • Furnish contract with original signatures of buyer and seller
  • If a source of your down payment is a gift:
    • Name, address and relationship of donor. Gift funds will be verified in both the donor and recipient’s accounts.
    • Note: Not all loan programs allow gifts to be part of your down payment.
  • For FHA Financing
    • Evidence of Social Security Number and photo identification
  • For VA Financing
    • DD214 and Certificate of Eligibility
  • For Construction/Perm Loan
    • Signed construction with cost breakdown, builder plan and specifications