There Are Do’s and Don’t Do’s While You’re in Escrow
There are do’s and don’t do’s while you’re in escrow. But, before we get to the do’s and don’t do’s, let me give a simple explanation of what escrow is. Escrow comes from an old word that basically means a piece or scrap of paper. In real estate, when two or more parties enter into a contractual agreement which involves money, it is said that the agreed upon contract is in escrow. The agreement is typically followed by the exchange of money which is held by third-party who will hold money until the contract parameters are complete.
In real estate, the listing or selling broker is more likely to hold the escrow monies in a separate escrow account. During the escrow period, the buyer will be working through the lending process and the seller will be taking care of any negotiated repairs and legal requirements necessary for him/her to fulfill his/her part of the contract.
For the buyer, the escrow is especially sensitive when it comes to money. There are definite do’s and don’t do’s during that period. As the buyer is working with a lender, his financial situation should freeze in place on the debt side and improve on the asset side if there are opportunities to do so. What should a buyer do and not do during escrow?
Don’t do these during escrow
- Don’t open new credit accounts. The lender will pull a credit report just before closing. Any new credit accounts may affect the credit score of the buyer.
- Don’t take unpaid time off from work. A consistent and steady income is what the lender is basing his assessment of the buyer on.
- Don’t buy a new car, furniture or anything on credit during that period. Every added debt changes a buyer’s status.
Do these during escrow
- Do continue to pay all debts on time or in full if possible.
- Do pay all debts on time or before their due date. I had a contract fall apart a few days before closing because a buyer failed to pay a mortgage payment on time in the month of closing.
- Do collect any gift letters from participating family members. Sometimes, a family member will gift down-payment or closing cost funds to a buyer. There needs to be evidence of the funds existence and a gifting letter should be on file to confirm that the funds will be available at closing.
- Do continue to show up for work and deposit paychecks to show a pattern of employment and income.
I always encourage my buyers to freeze in place. Don’t do anything that will have a negative affect on their contract. They need to continue to do the positive things they have done that caused them to be qualified for their loan in the beginning, and they need to avoid anything that would negatively affect their purchases. There are definite do’s and don’t do’s while you are in escrow. Knowing which ones to pay attention to can make a home purchase a breeze.
When you’re ready to make that home purchase, give Cornerstone Business Group, Inc., a call and we’ll help you navigate the process. We are your local real estate sales pros.