Escrow is an important part of the home buying process and today we’ll share 10 habits of a successful escrow. An escrow account is established for home buyers once they’ve made an offer on a home and the offer has been accepted. The buyer will then need to make a deposit, also referred to as earnest money, to the seller. Those funds are then placed into an escrow account until closing.
Once the closing has been finalized, the money in the escrow account will then be released. This money is usually returned to the buyer so that they can apply it towards their down payment or closing costs. The amount that’s required to be entered into most escrow accounts is usually around one to two percent of the sale price that’s been agreed upon.
Buying a home in California is frequently done with an escrow. Here are a few things that you should and shouldn’t do to maintain a strong escrow:
1. Get pre-approved for a mortgage if you haven’t already
Being pre-approved for a mortgage gives you a significant advantage when it’s time to look for houses. A lender will review your employment and credit history and then issue an approval letter stating amount they are willing to lend you. You’ll know what homes are in your price range, and you may be able to buy a home sooner than others who haven’t been pre-approved yet.
2. Set reasonable expectations for your home search
When it comes to searching for the ideal home, sometimes the sky’s the limit. However, you still have to keep your expectations realistic. Don’t try to buy a home that’s more expensive than you can actually afford. You may have to go without a few amenities on your wish list, or look for properties that are a little farther away from your ideal location.
3. Have your documents in order
When you meet with your lender, they may ask you for copies of pay stubs, tax returns and other documents for proof of income and employment. You should have these items readily available. If you don’t, take some time before meeting with them to ensure that you have everything that you need.
4. Don’t make any large purchases in the meantime
It may be tempting to splurge on a few luxuries once you’ve been pre-approved for a loan. However, this is something that you should definitely avoid. It may put you into debt, and it could hamper your ability to cover the down payment, closing costs and other associated expenses. Large purchases may cause the lender to scrutinize your loan request, and they may even have reason to disallow or deny it in certain situations.
5. Have a strong negotiator on your side
If you’re not assertive enough, you may want to have your realtor or another qualified expert at your side. You need to stand up for your rights in a home sale. Don’t let a buyer persuade you to buy the home for a higher price, skip the home inspection or do anything that could otherwise put the sale in jeopardy. Express your concerns about any repairs or renovations that need to be made and have a thorough discussion about which party will be responsible for them.
6. Ensure that all necessary inspections are performed
In many property transactions, a home inspection, home appraisal, and sometimes a land survey are required. Follow the rules and regulations in your area and make sure that no mandatory inspections are missed. You can work with your realtor and the seller to ensure that these tasks are performed in a timely manner. You should attend the home inspection, and you may attend the other inspections if you wish.
7. Communicate at all times
Communication is an essential part of any home sale. Stay in constant contact with your real estate agent, the seller, title agent, inspector and anyone else that will be involved in the process. Be ready to answer questions or provide additional documents if necessary. Express any concerns that you may have and don’t be afraid to ask questions as they arise.
8. Keep all of your active accounts current
Your finances should be in good standing while you’re working to buy a home. All bills should be paid on time. If you have any other outstanding loans or debt, now is the perfect time to pay them off or pay them down as much as you can. You may also want to set a budget for yourself. Review your current income and expenditures to see if there are any unnecessary or redundant items that can be eliminated. Set aside a certain dollar amount from each paycheck for your your down payment and other fees, such as closing costs, title searches, homeowners insurance and monthly utilities.
9. Don’t apply for credit with other lenders
Applying for credit cards, loans or other forms of credit with other institutions can raise a few red flags. It may make your lender question your intentions. It can also create too many inquiries into your credit history. These requests may even reduce your credit score.
10. Don’t co-sign for others
If you co-sign for a loan or other obligation for another person, you could be held liable if they default. This can also negatively impact your credit. If someone asks you to co-sign for them, kindly decline and calmly explain to them the reasons why you can’t honor their request at this time.
These are just some of the many things to watch for while you’re in escrow. The escrow process typically takes anywhere from around 30 to 60 days to complete or more, depending on circumstances. Most escrows shouldn’t take much longer than 30 days to complete.
Staying calm and using common sense are essential for enduring an escrow. Keep in mind the fact that you’ll be a homeowner soon. It’s an important responsibility that shouldn’t be taken lightly. The escrow will expire before you know it, and you’ll be a homeowner! You can look forward to spending many days in the type of residence that you’ve always wanted.