Welcome to the seventh and final post in a series of 7 posts covering the more important issues about buying a home in Northern Nevada.
In the first post, we covered the topics "Why Should I Own A Home?" and "Why Should I Use a REALTOR®?".
In the second post, we covered "Real Estate Commissions Explained" and "7 Steps to Prepare for Home Ownership".
In the third post, we covered "Your New Northern Nevada Home Wish List" and "Tips for Finding the Perfect Neighborhood".
In the fourth post, we covered "Get Your Finances In Order" and "Think Like a Lender: Let's Do The Math".
In the fifth post, we covered "What To Expect When Writing The Offer" and "What Your Northern Nevada Home Inspection Should Cover".
In the sixth post, we covered "Things You Should Know About Homeowner's Insurance" and "What Exactly Is Title Insurance, Anyway?".
Whether you've owned a Northern Nevada home before, or you are a first time Northern Nevada home buyer, having a Buyer's Guide can be a very helpful tool before, during, and even after the homebuying process.
Since most people don't buy and sell homes every month, let alone every year, we have put together a fantastic 36-page "Just For Buyers" Guide courtesy of GreatNevadaHomes.com.
In this post, we'll be covering "Mortgage Escrow Accounts Explained", "Understanding Closing Costs" and "What To Expect at Close of Escrow".
Mortgage Escrow Accounts Explained
Mortgage escrow accounts ensure that homeowner’s property taxes, fire and hazard insurance premiums, mortgage insurance premiums, and other escrow items are paid in a timely fashion. The escrow accounts ensure that there is enough money to pay these bills when they are due. It prevents the homeowner from facing lapsed insurance coverage or delinquent taxes and protects both the lender and you, the owner. Borrowers should receive a full breakdown and explanation from your lender before signing any documents.
1. Escrows work like an automatic budget. The primary advantage of an escrow account for the homeowner is that they automatically budget the borrower’s tax and insurance responsibilities over the course of a year. Homeowners do not have to worry about coming up with several large, lump sum payments. Rather, you make a smaller monthly payment with your loan.
2. Limits on the amounts lenders can collect. The law specifies the limits on the total amount that the lender may collect for escrow. The lender may require a monthly payment of 1/12th of the total estimated taxes, insurance premiums, and other charges reasonable anticipated. If the lender predicts there to be a lack of money in the escrow account, the law permits the lender to require additional monthly deposits to avoid or eliminate the deficiency. On the other hand, the lender is required to provide you an annual summary of all monies placed into your escrow account and show the payments made to various agencies, like your insurance carrier and your local property tax assessor. If they have overestimated the amount necessary and you have a balance in your escrow account, the lender is required to reduce the monthly amount necessary for you to deposit into your escrow account, or they can provide you with a one-time refund to reduce the balance in the account to the legally accepted amount.
Understanding Closing Costs
A common mistake that causes a tremendous amount of frustration by home buyers is underestimating the amount of cash (closing costs) needed to move into the house. Most people wrongly assume that all they need for closing is the down payment. People simply don’t understand what occurs during closing, and often don’t ever ask for specifics from their agent. Closing items charged by the title company, lender, and taxes by the county and state agencies can add up to a substantial amount and can be devastating to the transaction if not planned for properly. While each purchase is unique, we have developed a form we use called the “Buyers Estimated Closing Costs” page that is a summary of all the types of fees charged at close of escrow and have included a sample on the next page.
Please keep in mind that depending on what lender you use, what lender programs you qualify for, and what your credit rating is, the lender fees can vary greatly. This is why we recommend buyers get pre-qualified with a lender prior to looking for a house – it directly impacts the amount of money needed to bring to closing, which in turn, affects the amount you will have available for a down payment, which in turn, ultimately affects the sales price of a home you are approved to purchase.
What To Expect at Close of Escrow
Finally, the day has come for you to settle on your new home. What can you expect?
First, you and your agent will do a ‘final walkthrough’ of the home. This will be your last chance to examine the home carefully and ensure that what you contracted to buy is what you are buying. It’s a good idea to check hot and cold water at each faucet, flush each toilet, test all appliances, and examine the home thoroughly. Your agent will have a digital camera handy to photograph any questionable items in case the sellers are not present. This way you can address any last minute ‘hiccups’ before you sign your paperwork officially closing the escrow on the house.
It’s important to understand that sometimes things do occur that are no fault of the seller. Make sure you conduct your walkthrough without a skepticism, but with an objective eye, and if you do find something wrong, come to the escrow company office with a calm, problem-solving perspective. Most sellers want to complete the sale as much as you do and want to do what’s right to make sure you are happy. And of course, your agent will be there to present any problems and negotiate an amicable resolution for everyone.
You can expect to review the HUD-1 Settlement Sheet a day or two prior to your closing so you will know how much money you will need to bring to closing. This typically involves you going to your bank to obtain a cashier’s check, as escrow companies do not accept cash or personal checks. Then, be prepared to sign, sign, and sign your name some more – sometimes it can take over an hour to complete all the paperwork! But in the end, you’ll receive the keys to your new dream home and it will all be worth it!
If you'd like a FREE copy of our complete 36 page Northern Nevada "Just for Buyers Guide" just let us know. We're happy to provide you with one to assist you on your road to home ownership.
Posted By: Christianne Gordon - Northern Nevada Real Estate Agent - RE/MAX Realty Affiliates, specializing in Carson Valley Real Estate and Northern Nevada Real Estate.
