Escrow Accounts Could Be Of Critical ImportanceTo execute escrow closing a buyer has to do a number of things. Which are vital for the successful transfer of a property. To begin with he has to foccs on escrow accounts. Escrow accounts form the legal aspect, and are also supervised by the escrow agent. It is equally important to understand the need and functioning of an escrow account. An escrow account is like a saving account that a buyer of the property has to open when he takes a loan, and signs the agreement, or deed of escrow. The process of escrow includes various steps, and leads to various types of expenses. After the agreement of escrow, a buyer needs to pay different taxes and insurances when due. An escrow accounts secure buyer's lender from unwanted circumstances. The amount that the buyer is supposed to deposit each month in his escrow account can be estimated and decided by buyer as well as lender depending the legal requirements. And, an amount which satisfies the requirement of both parties can be agreed upon. An escrow account is beneficial for the lender to ensure that the tax and insurance payments of the property are duly made. And, in case the property is destroyed, the loan of the lender is secured. There is a particular date, and the lender makes the payment for the various items of escrow accounts on that particular date. It is good for both the lender as well as the buyer that payments are made on time to avoid any penalty, and/or extra charges. A regular payment in the escrow accounts insures that the buyer does not have to face any financial deficiency in his tax and flood insurance. The statement of escrow account provided to the buyer gives him a clear picture about his payment status. Opening an escrow account is always beneficial to avoid handling various complex transactions, and also for fulfilling varied requirements every month. The legal aspects of escrow accounts are covered under RESPA. The various guidelines made by RESPA, which are followed by escrow accounts, include: (1) The establishment to collect 1/12 of the annual payments on a monthly basis. Which are used to pay the tax and insurance charges. (2) It allows lender to maintain 1/6 of the total annual payments as a cushion. It is beneficial to avoid extra payments when there is more money in escrow account. (3) Lenders are liable to provide an Initial Escrow Account Disclosure Statement to the buyer within 45 days of closing and annual Escrow Account Disclosure Statement each month thereafter. It is crucial for the lender as well as the buyer to consider the legal aspects of escrow accounts. Escrow accounts protect the interests of both the parties, and ensure smooth financial transactions between them. |