Closing on a House: What to Expect

The time between when you go into contract on a house and move in is busy. An essential element of the contract not falling through is an on-time closing. Understanding the homebuying process and what’s involved in closing on a house can help prevent headaches, prep required documents and prevent you from losing the home of your dreams. Benzinga will help you protect your dream home by clearly describing everything that happens during the crucial phase of closing your home purchase.

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What Happens During the Closing Process?

After all the showings, placing an offer, inspection, and loan paperwork comes the closing process. It’s when you reap the rewards of your hard work in finding the perfect home and negotiating a good deal for it. Closing is the legal process that makes the home yours.

Getting to closing day requires preparation and documentation. Often, there’s a 30-day gap between when the seller accepts your offer on a home and closing. You can expect to complete these activities in the days leading up to your closing:

• Assembling required documents, such as any final details for your mortgage or proof of adequate funds to buy the property.
• Purchasing homeowners insurance that will be in effect when you hold the keys to your new home because anything can happen, and if you have a mortgage, your lender will require it.
• Signing off that you’ve reviewed your mortgage loan disclosure documents to keep the process moving.
• Wiring cash required for closing.
• Attending the 1-2-hour closing with a title company to officially close on the home and make it legally yours. Don’t miss this appointment as changing the closing date could impact your agreement with the seller.

How to Prepare for Closing on Your Home

Your home closing date is an important milestone. Make sure you’re ready by completing these preparation activities.

Consider Hiring a Real Estate Attorney

Buying a home is a complex legal process between buyers and sellers, with many third parties involved. Hiring a real estate attorney can help you understand what’s happening, keep things on time, and prevent you from becoming a fraud victim. You are not required to hire a real estate attorney; it is completely optional but could help prevent problems later in the process.

Make Sure to Complete the Paperwork

At closing, you’ll sign a mountain of paperwork, ranging from agreements to uphold the homeowners association requirements to agreements to pay your monthly mortgage payments. Before closing, you should familiarize yourself with the required paperwork and ensure you’re meeting all deadlines for providing copies of required documents. Here’s a look at what you can expect:

Loan Application

Review the original loan application documents as these will be part of your closing documentation. Ensure no details have changed since you applied for your loan. Common scenarios include job changes or new lines of credit. These can impact the final loan terms and you don’t want to discover that at closing.

Title Documents

The title company will ensure that the seller owns the property and has the right to sell it to you. This includes checking for liens so you don’t have surprises or expectations that you’ll pay the previous homeowners' debts. Only rarely does this process turn up surprises concerning property ownership.

Seller’s Disclosure

In most states, the seller is legally required to complete the seller’s disclosure, which outlines any known defects, such as water damage, infestations, foundation problems, etc. Review the disclosure to avoid surprises when you start living in the home. Some of the items might have come up during inspection, or you might have noticed them during the final walk-through. The seller’s disclosure can prevent you from having buyer’s remorse about buying a home with defects that are not readily apparent.

If you find items in the seller’s disclosure that concern you, request more information. The seller can provide documentation about the defects, or you can have a skilled inspector review the property to investigate the issue further and ensure it is resolved or provide resolution details. 

If you aren’t pleased with the disclosure but still want the home, you can negotiate with the seller to have them pay for remediation of the issue or reduce the purchase price so you can pay to fix it.

Some states do not require seller disclosures. Discuss your options with your real estate agent when you want to know more about the home you’re preparing to purchase.

Closing Disclosure

At least three business days before closing, your mortgage lender is required to send you your closing disclosure. It details many important pieces of information, including:

• Closing costs
• Cash to close or the amount of money you must bring to closing
• Loan term
• Loan amount
• Interest rate
• Estimated monthly mortgage payment
• Loan disclosures

You should review this information closely as it is everything you’ll agree to at closing. Compare your loan estimate to the closing disclosure to look for discrepancies. Ask your lender questions about anything you don’t understand or need clarification on because you’ll be entering into a legal agreement with the lender to pay the fees outlined and the monthly payment, which you cannot change without refinancing the mortgage.

Secure Homeowner's Insurance

If you’re taking out a mortgage on the property, your lender will require that you carry homeowners insurance at the time of closing. Work with your insurance agent to select insurance that protects the home's value based on its unique characteristics. 

It’s wise to work with an agent because they can ask questions about the home, including its condition, features, and risk factors. For example, a home with a finished basement might need additional water backup protection. An agent can also help you balance coverage with an affordable price. 

Prepare Your Finances

The financial aspect of closing is unlike anything you’ll encounter in everyday finances. Review your closing disclosure documents for crucial information related to the following to ensure you have money in the right places to secure a timely closing.

Earnest Money

Showing the seller you are serious about the home includes placing money in an escrow account. Earnest money can aid in protecting the seller in the case that you decide not to buy the house between the time you place your offer and close on the home. At closing, the earnest money goes toward your closing costs. 

Cash To Close

During closing, you’ll pay your down payment and closing costs. This is known as cash to close. At a minimum, you’ll be putting 3% of the home’s value down in addition to your lender’s required closing costs. You’ll need to wire your cash to close to the appropriate party before closing to get the keys to your new home at the end of the process. In some instances, both the buyer and seller agree to disburse funds after the closing, though you won’t own the home until this process is complete.

Seller Concessions

The seller might have agreed to cover some closing costs during the contract negotiation phase. This is known as seller concessions and can happen if the inspector finds something wrong with the home or the seller wants to make the property more attractive to buyers in some way. This will be a factor in the final closing cost you pay.

Lender Credits

Your lender might offer you credits to make closing more affordable and attractive to buyers. This is a bargaining chip lenders use to help you choose them when evaluating your options for mortgage lenders. However, lenders offer these credits in exchange for a higher interest rate.

Closing Costs

Your lender and other third parties charge these costs to acquire your loan. It includes everything from your lender fee to the appraisal of the property. Closing costs are included in the cash-to-close calculation. 

Schedule a Final Walk-Through of the Property

A lot can happen to a property between your showing or inspection and the day you move into the home. Other people have lived there and used the property for 30-45 days, leaving room for new damage or property changes.

You should schedule a final walk-through right before closing to ensure the property is in the same condition as it was when you went into contract. This is also an opportunity to ensure that the owner completed the repairs you requested and included in your offer or contingencies. If you requested that the seller remove certain personal items from the home, check for those in your final walk-through. Items such as basement freezers or a pool table could be costly to remove from the home, and once you close on the home, you won’t have leverage to ensure the seller completes this process.

Attend the Closing Day

You’ll set your closing date in accordance with the contract you signed to buy the home. Your closing date should be no later than what is in the contract, though it could be earlier if both you and the seller agree to it.

Show up to your closing appointment on time and be prepared for the appointment by following these guidelines.

Who Should Be Present?

Anyone listed on the deed must be present at closing and prepared to sign documents. Your real estate agent or attorney should also be present to answer questions or solve any problems that might arise.

While the seller might be present, most transactions now involve a presign where the seller signs all required documents. A seller might also designate someone with power of attorney to sign at closing if they cannot be present, such as selling a home in a different state from where they currently live.

What Should You Bring?

You won’t have to worry about bringing the closing documents. Your title company will handle that part with the sellers and your lender. However, you will want to bring the following:

• A government-issued photo ID: such as a driver’s license or passport or state-issued photo ID
• Proof of funds to close such as a receipt of the wire transfer from your bank to the title company or a certified check for the funds.
• Proof of homeowners insurance, if required
• The closing disclosure from your lender so you can review it one last time before signing

What Exactly Happens?

You have two main roles during closing: signing documents and paying closing costs. Closing is the legal transfer of the home from the seller to the buyer. It involves these steps, though they might vary depending on how you handle the home purchase transaction and the state where you’re purchasing the property.

• The title company will check your photo ID and likely make a copy to keep on file
• Ask any questions you might have before you begin signing documents
• You’ll review documents and sign them
• Provide proof of wire transfer or provide a cashier’s check for closing costs
• Get the keys to your new home that you are now the legal owner of
• After closing, most title companies mail you the official deed that you should file and keep on hand

How Long Does It Take to Close on a House?

The typical time frame from when your offer is accepted to buy a home to when you close on the house is 30-45 days. Many factors can impact this timeline, namely the mortgage loan and ensuring a timely home inspection to keep the process moving as scheduled.

How to Avoid Closing Delays

Avoid common issues that can hold up closing or even lead to a breach of contract, which could result in losing the chance to buy the home. Here’s how to keep the process moving on schedule.

• Be responsive to your lender: Lenders know how to keep home closings on schedule. They complete this process frequently and know how to keep things on schedule. Provide documents as requested, such as your bank statements and proof of income. To prevent delays, you can ask your lender what documents are required once you go into the contract to assemble them and start the process.
• Avoid financial changes: A new loan, a change in employment or large purchases could lead your lender to deny you the mortgage. You want to do your best to keep your finances as when you applied for your loan and received preapproval. 
• Know common mortgage scams: When buying a home, you are vulnerable to mortgage scams. That doesn’t mean your lender is unreliable. It just means that other parties use this time to trap you. Before wiring money, verify the details with your lender. Avoid clicking links in emails from individuals you don’t recognize, such as a new person claiming to be with your lender. Most lenders don’t text you so be suspicious of requests you receive for personal information via text. Your lender will avoid last-minute requests so if anything tells you to act quickly and it seems a little off, it is likely a scam.

Find the Best Mortgage Offers From Benzinga’s Top Providers

The mortgage lender you select will greatly affect your home closing. Ensure you have the best in the industry by selecting one of Benzinga’s top providers.

Legally Transferring homeownership through Home Closing

The home closing is a crucial step in the homebuying process because it legally transfers ownership to you and any party you’re buying the property with. It’s an exciting day but it can also include some jitters as any legal process can due to its complexity. The more you know going into the process, the easier it will be to feel prepared and know what to watch for.

Frequently Asked Questions