Balancing Mortgages with Back-to-Back Escrow

By Kelly Richardson
LoanPage.com Columnist

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In an ideal real estate world, the homeowner is able to sell an old home and move right into a new one seamlessly. In order to help achieve that goal, most mortgage lenders offer back-to-back escrow services. Here's a summary of how back-to-back escrow works and how it affects the loan process.

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The prospect of acquiring a home loan for a new property before the other sells can be stressful. In the past, homeowners have actually had to pay two house notes if the sale of the first property didnt go through in a timely fashion. Back-to-back escrow describes the arrangements that an owner makes to oversee the sale of one property and the purchase of another at the same time.

Home Mortgage Exchange: Challenges

  • » Slim Window. A delay in the closing of the first mortgage has the potential of delaying or destroying the prospect of a new home.
  • » Last Minute Problems. Some of the things that can hinder the closing and purchasing deal include discrepancies in price or property expectations.
  • » Financing Concerns. The simple fact is that some buyers end up forfeiting the deal in the end due to poor credit or insufficient closing funds.
While all difficulties can neither be foreseen nor avoided, back-to-back escrow solves some of them. Before you enter into a sell/buy arrangement with two mortgage lenders, you should know what back-to-back escrow can do for you.

Benefits of Back-to-Back

  • » Good Intentions. When you enter into a back-to-back escrow agreement, you are letting all stakeholders know of your intentions from the start. This keeps everyone on their toes to make sure each step is realized.
  • » Financial Disagreements. If you are at an impasse as to how much you will take for your original home, placing enough money to cover the difference in escrow will allow you to negotiate even as the deal continues onward.
As with any real estate deal, you should consult your mortgage lender for specifics and guidance. Ask about the process of back-to-back escrow and how to increase your odds of a successful exchange.

Source:
When home sellers lie, MSN Real Estate

About the Author
Kelly Richardson covers the real estate scene in major cities across the country. His articles appear in educational journals, periodicals, and e-zines.

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