What we'll cover
What goes into the home closing process
How to prepare for closing day
Closing costs you can expect to pay
Finding your home is an important decision, both personally and financially, with a lot at stake. It’s normal to feel excited and anxious when you’re nearing the end of the mortgage process. Ensure you’re prepared for the final steps of your homebuying journey with these fast facts and best practices.
What does closing on a house mean?
Between touring houses to find the right place, securing a loan, putting in an offer and settling in on moving day, the process of purchasing a home can take months. Closing is a series of final steps that can include fees, inspections and more. Closing day is when the home, condo or townhouse legally and officially becomes yours.
How long is the process of closing on a house?
A typical closing process — from filling out the loan application to signing the paperwork on closing day — will take between four and six weeks. Expect the day-of closing process to take between one and two hours as you sign paperwork and ask your realtor or attorney any remaining questions.
What are the steps of the closing process?
Getting to the finish line of your homebuying process is less of a sprint and more of a marathon. Depending on your purchasing circumstances there may be additional steps, but almost all closings will include the following:
1. Purchase agreement acceptance
A purchase agreement is a contract written up by either a real estate agent or attorney that lays out the details of the transaction, which will include:
Identification of the buyer(s) and seller(s)
Legal description of the home and property
Purchase price
Earnest money deposit amount
Buyer financing
Closing costs
Contingencies
Contingency time frame
Offer expiration date
Closing date
Both buyers and sellers must accept and sign this agreement to legally complete the sale.
2. Loan origination
Origination refers to the process in which the buyer is qualified and verified for a loan. You can request a loan from a bank, work with a lending company or get assistance from a national or state homebuyer program. You’ll first need to complete a mortgage application and provide proof of income and assets including pay stubs, W-2s, bank statements, tax returns and investment statements. The lender will then provide a loan estimate for you to review and approve before moving forward with the transaction.
3. Homeowners and title insurance
For the property sale to go through, you’ll have to provide proof of homeowners and title insurance. Home insurance covers home repairs in the event of damage and is usually included in your monthly mortgage payment. Title insurance protects you and your lender in the event of any title issues.
4. Home inspection
You may choose — or in some cases be required — to schedule a professional home inspection done by a third party. You should attend if possible. In this inspection, a trained individual will assess the condition of appliances, utilities, electrical, plumbing, heating and cooling, exterior and more throughout the home. The resulting report will be your guide for any existing or potential issues you’ll have to address once you move in. If issues are found, you will work with the seller to determine who will cover the costs to fix them.
5. Closing disclosures
Once everything else is locked down, you’ll receive a notice of the closing date, time and location, as well as a list of what to bring on closing day (more on that below). You’ll also be given a closing disclosure by your lender which includes your final loan terms and closing costs.
6. Final walkthrough
The day before closing, your real estate agent will schedule a final walkthrough of the property to ensure the seller’s furniture and belongings are gone. Take this time to test appliances, faucets, light fixtures, windows, doors, locks and anything else you can think of — this is your last chance to confirm everything is in proper working order before sealing the deal. Express concerns and ask any remaining questions you have; you don’t want to sign or pay for something you feel unsure about.
A typical closing process — from filling out the loan application to signing the paperwork on closing day — will take between four and six weeks.
What to expect on closing day
Congrats, you made it to closing day! Today you’ll meet your real estate professional and closing agent to sign a lot of paperwork. Your realtor should go through and explain each document one by one.
Documents to prepare for closing
Make sure you have the following items ready for your closing day:
Inspection documents
Appraisal information
Loan documents
Homeowners insurance
Certified check for closing costs
If you’re working with a real estate agent or attorney, they will likely have most documentation provided for you (besides payment), but it never hurts to contact them and confirm.
What should you bring on closing day?
Your agent or attorney will tell you in advance what you need to bring on closing day, including:
A form of identification, like a driver’s license or passport
The down payment in the form of a certified or cashier’s check
Note: cash and personal checks are NOT accepted
Your closing disclosure
Proof of homeowners and title insurance
Closing costs to expect
In addition to your down payment, there are other fees and expenses you must pay prior to becoming the home’s legal owner. Typically, these closing costs total between three and four percent of the price of your home and fall into three categories:
Fees paid to the lender: This might include the origination fee, discount points, underwriting fees and sometimes processing or application fees.
Fees paid to third parties: These costs include payments for the appraisal, property survey, title search, title insurance, attorney, credit bureau, flood certification, tax certification and recording/state fees.
Other fees: Additional costs may include mortgage insurance and an escrow account (an account that you fund and your lender manages). Each month when you make your mortgage payment, it includes additional charges to cover taxes and insurance. Those funds are placed in escrow and used by your lender to make payments on your behalf.
Home title transfer
Last, but not least, the title of the home will be officially transferred to you. A property title is in possession of its legal owner, so a critical step in closing on your home is getting that title transferred to your name. To do so, both the seller and buyer will need to sign a deed that details a description of the property. This should be provided by your real estate agent.
Finish your homebuying journey on a high note
The home closing process may seem overwhelming, but by getting all your ducks in a row and working alongside your realtor and lender, you can rest easy and collect the keys for your new home in no time.
