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FHA loans require an escrow account be maintained for property taxes, homeowners insurance, and mortgage insurance premiums (MIPs). The latter is required for borrowers making less than a 20% down payment.
Typically, both sides retain real estate attorneys to draft and negotiate the contract. When a buyer signs a home purchase contract, he must give the seller a down payment, normally 10% of the total purchase price.
Your escrow account will cover regular property taxes and homeowners insurance, as well as flood insurance if its required in your area. It does not cover water/sewer bills or one-off assessments by your local government. It does not cover homeowners association dues or supplemental tax bills.
The escrow instructions give the escrow holder the authority to act, telling the escrow holder what to do and when to do it. They indicate all of the specific steps to be completed (and conditions that must be satisfied) before the escrow is complete.
The two essential elements for a valid sale escrow are a binding contract/agreement between buyer and seller and the conditional delivery to a neutral third party of something of value, as defined, which typically includes written instruments of conveyance (grant deed) or encumbrance (deed of trust) and related
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In California, there are two forms of escrow instructions generally employed: bilateral (i.e., executed by and binding on both buyer and seller) and unilateral (i.e., separate instructions executed by the buyer and seller, binding on each).
For a home purchase, these instructions must include the following: the purchase price and terms; agreements as to mortgages; how buyers title is to vest; matters of record subject to which buyer is to acquire title; inspection reports to be delivered into escrow; proration adjustments; the date of buyers possession
Escrow is a legal concept describing a financial agreement whereby an asset or money is held by a third party on behalf of two other parties that are in the process of completing a transaction. Escrow accounts are managed by the escrow agent.
When you close on a mortgage, your lender may set up a mortgage escrow account where part of your monthly loan payment is deposited to cover some of the costs associated with home ownership. The costs may include but are not limited to real estate taxes, insurance premiums and private mortgage insurance.
In a real estate escrow agreement, the buyer and seller agree to have a neutral third party an escrow agent hold the buyers funds while the contractual conditions and obligations of each party are fulfilled. Escrow accounts provide protection to all parties involved in the transaction.

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