Closing on Your Home

So, you’ve secured the offer on the home of your dreams, the seller accepted your offer and you’re excited and anxiously wondering what the next steps are in the home-buying process. There are several steps that need to be completed leading up to the closing, the final step to securing your home and becoming the legal owner.

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APA Howard, E. J. (2022, June 20). Closing on Your Home. Annuity.org. Retrieved June 26, 2022, from https://www.annuity.org/real-estate/buying/closing-on-your-home/

MLA Howard, Ebony J. "Closing on Your Home." Annuity.org, 20 Jun 2022, https://www.annuity.org/real-estate/buying/closing-on-your-home/.

Chicago Howard, Ebony J. "Closing on Your Home." Annuity.org. Last modified June 20, 2022. https://www.annuity.org/real-estate/buying/closing-on-your-home/.

While closing on your home can be a smooth process, it can also be a rigorous process depending on all the paperwork involved and scheduled deadlines. Your realtor and lender will both assist you through the process to ensure that you complete all the necessary steps, but there are some best practices that are listed below to help you in understanding the closing process.

How Long Does It Take To Close on a Home?

The average ‌time needed ‌to close on a home is typically between 30 to 60 days. However, many factors influence whether closing takes more or less time. Buying a home is a multi-step process. It is best to be realistic when coordinating on a closing date with the seller and lender.

Each closing experience will be different as it pertains to the details in between. For example, an appraisal and inspection could take a couple weeks or there could be potential repair delays — even the type of mortgage loan you choose may be a determining factor on the average time to close.

What Happens on Closing Day?

Closing day consists of signing a ton of paperwork, so be sure you are well prepared in advance.

On closing day, the buyer will typically meet with the seller at the title agent’s or attorney’s office to go over and sign the closing documents. The buyer will review and sign the final settlement statement, in addition to closing documents like the mortgage promissory note and deed of trust.

The buyer will pay any remaining closing costs with a cashier’s check or money wire. The seller then signs documents transferring property ownership to the buyer.

Once all documents are signed and the closing costs have been received, the seller can officially hand the keys to the house over to the buyer. The title company will register the new deed with the county in the buyer’s name, and finally the deed is sent to the buyer.

What Do I Need to Close on a House?

There are many factors to consider when preparing to close on your new home. These include reviewing and understanding your closing documents, searching for adequate homeowners insurance and ensuring that your finances remain in good order throughout the closing process.

Documents

The mortgage pre-approval, closing disclosure, seller’s disclosure, title documents and loan application are all important documents necessary to close the transaction. You should review your closing documents thoroughly prior to closing day so you understand what you’re signing and can ‌make sure there are no errors.

A title search and title insurance are particularly important legal safeguards that protect you from any problems surrounding ownership when you buy the home. It is imperative to run a title search early in the closing process to examine public records and discover if there are any issues with the title — like someone else with a claim to or a lien on the property.

Do I Need Homeowners Insurance To Close on My House?

Most lenders typically require buyers to get homeowners insurance to close on a home. It’s best practice to inquire with your lender about their policy. Also, check your state’s homeowners insurance requirements, as some states require homeowners insurance before closing. This insurance protects the home from loss due to disasters, theft and accidents, and it’s always better to be safe than sorry.

Prepared Finances

The first step in the home-buying process is gaining mortgage pre-approval. This step can give additional bargaining power to the buyer and can make the closing process faster.

Ensuring that you practice good financial habits, maintain a good credit score and carry minimal debt can be favorable when getting approved for a mortgage. The pre-approval letter shows that the buyer has been approved for a mortgage and informs the buyer of the upper limit of their budget.

There are a few terms to become familiar with prior to sitting at the closing table:
Closing costs
Fees you pay to cover costs incurred by your lender while processing your loan. They include appraisal fees, title insurance, government taxes, lender origination fees, and prepaid expenses (property taxes, interest and homeowners insurance). Typically, they range between 2%-5% of the loan amount.
Earnest Money
A deposit made by the buyer to the seller that represents the buyer’s good faith to buy the home. It protects the seller if the buyer backs out and is normally around 1%-3% of the sales price, held in an escrow account until closing.
Lender Credits
Money your mortgage lender gives you towards closing costs in exchange for a higher interest rate.
Cash To Close
The total amount of money you are required to pay on the day of closing to complete the transaction of buying a house.

What To Bring On Closing Day

On closing day, there’ are only a few items you will need to bring with you for verification to complete your paperwork and settle the home transaction. It’s best to gather ‌these required items in advance prior to closing day so you won’t be scrambling at the last minute.

What To Bring to Closing
Documents
You should bring a copy of the final purchase agreement to double check the details on the day of closing.
Proof of Homeowners Insurance
Prior to your closing day, you must obtain insurance coverage on the home. Your mortgage lender will need proof of this to ensure there is adequate protection.
Funds
You will need to bring funds for closing. The attorney’s office will typically request that you either bring a certified cashier’s check from your bank or paperwork showing proof of your wire transfer of the closing funds.
Photo ID
You will need to bring a government-issued photo ID, driver’s license or passport for identification‌. Some mortgage lenders may require two forms of identification — a secondary form of identification might be a utility bill or insurance card.

Common Closing Day Issues

While every potential homebuyer hopes for a smooth closing process from start to finish, it’s important to be prepared for any issues that might arise on closing day. Here are some common closing day issues.

Finance Problems

The lender will verify the credit score and debt-to-income ratio of the buyer when issuing the mortgage pre-approval letter and again at the closing to ensure that the buyer has healthy enough finances to borrow a large sum of money.

If the buyer’s credit score decreases below the requirements for the loan type or if the debt-to-income amount increases because of the buyers’ money mismanagement, financing could fall through as a result of the lender denying the mortgage loan at the last minute.

Home Inspection Issues

During the closing process, the home inspector may have discovered some serious problems or defects in the home that need to be fixed before closing. If the buyer and seller disagree on negotiating how to fix the problem, this will likely cause delays.

The buyer will either have the option to walk away from the deal or the seller can address the issue and fix the problem. It’s best to have a home inspection contingency written into the contract so the buyer can back out without penalty and without losing earnest money in this scenario.

Mortgage Scams

Generally, at the start of the closing process, the lender hires a title company to perform a title search on the home to ensure that the seller has legal ownership to the property and that there are no liens or claims by other creditors against the property.

A title search can reveal issues that prevent a seller from transferring the home’s title. Common issues include bankruptcies, tax debts or contractor debts, child support liens or not being the rightful owner. Here, the seller will have to clear the title by settling outstanding liens or claims before they can transfer the title.

Also, beware of any email with last-minute changes to payment or wire instructions for closing funds. It may be a scam, as scammers are tempted to target closing funds.

Final Thoughts on Closing Day

The plethora of paperwork to sign can make closing day intimidating, but it’s also exciting — it’s the day you officially get to take possession of your new home. Learning as much as you can about what to expect on closing day can help you avoid problems and get the title to your home more quickly. Once you make it through signing all the legal paperwork, all the hard work is done and the keys are now yours.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: June 20, 2022

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