Buying a home involves a lot of moving parts, especially once your offer has been accepted. For first-time homebuyers, the escrow period can be particularly confusing because there is still quite a bit that has to happen before you get the keys.
Escrow is the period between an accepted purchase agreement and the final closing. During this time, the buyer may have inspections completed, finalize financing, review title issues and prepare for closing. The sale may feel like a done deal, but it isn’t yet. What you do during escrow can affect whether the transaction closes as planned.
1. Making a major purchase
That new house may need a new sofa, refrigerator or dining room table, but it’s usually better to wait until after closing to start shopping.
Your lender may check your credit and finances again before approving the final loan. Taking on a car loan, running up a credit card balance or financing a houseful of furniture can change your debt-to-income ratio and potentially affect your mortgage approval.
2. Making changes that affect your credit or finances
Keeping your finances steady during escrow is generally a good idea. Don’t open or close credit cards, miss payments or take out new loans without first considering how the change could affect your mortgage.
Even moving large amounts of money between accounts can create questions if the lender needs to verify where your down payment or other funds came from. When in doubt, talk to your lender before making a significant financial move.
3. Missing deadlines or underestimating closing costs
A real estate contract may contain important deadlines for inspections, financing, contingencies and other requirements. Missing one can delay the transaction or, depending on the contract and circumstances, jeopardize the deal.
Buyers also need to be prepared for the money required at closing. In addition to the down payment, that may include lender fees, title-related expenses, prepaid taxes, insurance and other costs.
Escrow isn’t simply a waiting period. It’s an important part of the transaction, and problems can still arise before closing. An experienced real estate attorney can help buyers understand their obligations, meet important deadlines and address issues that could interfere with the purchase.