How Will My Loan Be Handled in Escrow?
by Sandy Gadow
Once you have opened escrow and given the escrow officer the details of your purchase, you will next give the officer the name of the lender who will be financing your purchase. You may not know the name of the lender you will be using for up to 10 to 15 days, but as soon as you have your loan approval, you will notify your escrow or closing agent of the lender's name and address and your loan number, if it is available. Your escrow officer will contact your lender to begin coordinating the exchange of loan documents and the loan proceeds. It is important that your escrow officer and your lender work closely together. There may be items found in the title search which the lender may require be cleared up before closing. There may be unpaid taxes or judgments, which the lender would require be taken care of. Once you have given the lender all the personal financial documents which they require, it is then up to the escrow or closing agent and the lender to work together to finalize the loan processing.
When you applied for your loan, you will have filled out a loan application form, given the lender any required documents, such as bank statements, income verification statements, perhaps copies of your tax returns, and a copy of the sales agreement. You may have been asked to supply other documentation regarding your income and assets. Once the loan officer has all your pertinent financial information, your loan application will be submitted to the lender's processing department. During this time, the lender orders a credit report of your personal credit history and an appraisal of the property you will be buying. The lender may send verification forms to your employer, bank and creditors, to verify the information which you supplied on your loan application form. If any further information is needed, you will be notified to supply the missing information.
Once your loan has passed the processing department, it will be sent to the lender's underwriting department. The underwriting department will review your application, looking closely are your employment history and stability, your income as compared to your outstanding debts, your credit history, and the written appraisal which was performed on the property. Once an approval has been made, your loan will be returned to the processing department. If your loan is approved, you will be notified of the lender's decision. Your lender will also notify your escrow officer or closing agent of the approval and make a request for any additional title requirements which the lender may have.
The property your are buying may be located in a flood zone, or other hazard area, which would require special title endorsements to the policy of title insurance. The lender will notify your escrow agent as to these special requirements. If you are buying a condominium, your lender will require special condominium endorsements to the title policy. Your lender's processing department will coordinate with your escrow officer to be sure your lender receives any surveys, pest inspection reports and proof of hazard and flood insurance which are required. You don't have to worry about any of these details, as your lender and your escrow officer will work together to get the appropriate documents required for closing.
The one thing you should do, is to request a copy of each of the inspection reports and title search reports as they become available. Do not to wait until the last minute to review these reports. Read them over carefully and ask any questions well before your closing date. You may have requested a building inspection be performed on the property. Read it over carefully and be sure you understand everything listed in the report before signing your approval. Although typically a lender will not require a building inspection report, most buyers ask to have one performed. The lender will require a copy of the pest inspection report and clear verification from the pest inspector. Your closing agent will coordinate the proper insurance endorsements with your insurance agent. Your lender will require that they be listed as a "loss payee" on the policy and your insurance agent together with your escrow officer will handle that for you.
The purchase agreement which you signed with the seller will specify who is responsible for the costs at closing. Some costs will be shared between Buyer and Seller, while other costs will be divided between the two parties. Some costs, such as the loan fees and other specific Buyer costs will be the responsibility of the Buyer alone. You will have been given an Estimate of Closings Costs when you applied for your loan, which will spell out the costs associated with your loan. In order that there are no surprises, your closing agent will notify you with the exact amount of money you will need to bring to the closing to cover the down payment and any other funds necessary to close the loan.
Sandy Gadow, a frequent guest speaker on national radio as the escrow expert, has more than 25 years experience in escrow, title and real estate. A licensed mortgage broker and real estate sales associate, Sandy is a member of the American Land Title Association, the California Escrow Association, and the National Association of Real Estate Editors. She is the author of The Complete Guide to Your Real Estate Closing and a featured columnist at realtytimes.com.