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The Escrow Closing Process: What Borrowers Need to Know

Escrow Process Blog Image Cover
Point Equity
Escrow Process Blog Image Cover

Whether you're buying your first home or fifth, the loan process can be: Mysterious? Confusing? Different than the last time? All true. 

The good news is, your loan officer will provide answers to all your questions, and even some you don't ask. Still, a lot of things happen at the end of a loan, and confusion increases for some buyers. 

Knowing what to expect ahead of time makes a big difference.

In this article, we answer the questions borrowers ask most often about escrow closing. We start by explaining the role escrow plays in the loan process. Read on!

What Does "Being in Escrow" Mean?

The process of "being in escrow" starts when a seller accepts a written offer on their home and ends when the buyer is handed the keys to their new home. 

An Escrow Officer manages this process.

An Escrow Officer is a neutral third party who plays the middleman in the transaction. They're not working for the buyer or the seller. You probably won't interact much with the Escrow Officer until the end of the process.

As the middleman, the Escrow Officer holds money, including the buyers' deposit, in an escrow account until the terms of the purchase agreement and loan requirements are met. In fact, they won't release any money or close the escrow until this is done.

Now that you understand the role the Escrow Officer plays let's cover what's expected of you to close the transaction.

What do You Need To Do for Escrow Closing? 

As a buyer/borrower, your role is vital in closing escrow, but it's not complicated. 

Here's what you need to know:

Who will set up the closing appointment?

The appointment is arranged either by the real estate agent or loan officer. Timing is based on the Escrow Officer's schedule, buyer/borrowers' schedule, and the arrival of the loan documents from the lender. 

Once the escrow officer receives the loan documents, they prepare them for signing, including the Closing Disclosure (CD). The CD must be given to you three days before you can sign your loan documents (we'll go into more detail about the CD below).

Where will I sign the closing documents?

An appointment is usually made at the escrow office to sign loan documents. It can also happen at your Real Estate Agent's office, the Loan Officer's office, or your home - with a Mobile Notary.

Yes, you can even sign at home!

Do I need to bring anything to the closing?

Here's what you need to have at the closing:

  • A photo ID (drivers' license, state ID, or passport will work)
  • A cashiers check for the exact amount shown on the Closing Disclosure (CD...more on this below) or wire transfer information if you arranged to wire your funds.
  • Everyone who will be on the title/loan as a co-borrower must be present.

The Escrow Officer, or mobile notary, will provide you with everything else needed for the document signing and leave you with a copy of everything you'll sign.

When Do I Find Out How Much Money to Bring?

When you first applied for your loan, you received a Loan Estimate (LE) from your lender. The LE provides a close estimate of the closing costs and down payment you'll need to close escrow.

At the close of escrow, the Loan Estimate is finalized and presented in a Closing Disclosure (CD). The difference between these two documents depends on the details of your purchase, but are often within a few hundred dollars.

Any variation up or down might be due to choosing a different loan program or the interest rate you locked in. Also, there might be changes due to the premium for the homeowner's insurance you purchased.

The CD will pinpoint items that increased or decreased from the amounts provided on the Loan Estimate. 

Since you must receive the CD three days before signing the final loan documents, there's time to get a Cashiers' Check or arrange for a Wire Transfer of the funds you need to provide.

Why Do I Need to Decide How I'm "Taking Title"?

Great question, and the Escrow Officer needs to know this information before preparing the closing documents, but how do you answer this? 

Below are the different ways you can hold title in property in California. Narrow down what seems to fit your situation the best, then get expert input before choosing the right option. 

Sole and Separate Property: When no one else can claim ownership of the property except you, the title is held as your sole and separate property. 

In California, a community property state, married individuals wishing to hold title as sole and separate property need their spouse to sign a Quitclaim Deed at closing so "community interest" can't be claimed at a later date. 

Tenancy-in-Common: This is a common way unrelated buyers hold title in property. The percentage of ownership is stated on the deed unless it's equal. 

Each tenant (owner) has equal rights of possession, and there's no right of survivorship, which means upon the death of one of the owners, their share does not automatically go to the other owner(s).

Joint Tenancy: This form of taking title provides the right of survivorship. If one of the joint tenants dies, their interest passes automatically to the surviving party or parties without probate. All joint tenants own an undivided equal interest in the property.

Community Property with Right of Survivorship: This is available in California because it's a community property state. Both husband and wife have an equal right to possess the property during their marriage, and upon the death of either spouse, the surviving spouse receives the deceased spouse's property share. 

Spouses may not pass their interest to someone other than their spouse in a will, and probate is not required. This option is only available to married couples and registered domestic partners.

When Do I get The Keys?

After you and the seller both sign all necessary documents, and all funds are in escrow, the Escrow Officer returns the loan documents to the lender for a final review. When the lender gives the green light, they send the loan funds to escrow.

The Escrow Officer will then disburse all funds and send the legal documents to the County Recorder. When confirmation is received that the new Grant Deed has officially recorded - you get the keys to your new home!

While everyone's situation is different, we hope knowing the answers to the most common questions about closing escrow removes the confusion from the experience. 

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