Steps to closing on a home
Closing on the purchase of a house is a process which finishes on the closing date when the seller, the buyer, the bank, and title company come together and seal the deal. As the buyer, you sign a stack of documents, pay closing costs, and receive the keys to your new home. Closing on a mortgage loan for a house is a complex, legal process in which the buyer becomes a homeowner. By following these ten steps to closing on a house, you should arrive at your closing with everything in order.
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What to know before closing on a house
When you are preparing to buy a house, you can expect to be in close communication with your lender, attorney, and real estate agent as you approach closing. Once the seller has accepted your offer and your lender has approved your financing, you're approaching the finish line of the home buying process.
Home closing process
Here are the typical steps to closing on a house:
Loan approval
Once you have completed any underwriting requirements set by the lender, they will notify you that your mortgage has been approved.
Home inspection
Hire a licensed home inspector to thoroughly inspect the property. The home inspection report will identify significant issues that the seller must address prior to the sale.
Appraisal
Your lender will typically require an appraisal of the property. Usually, the lender chooses the appraiser, and the buyer pays for it.
Purchase homeowners insurance
Your lender will require you to provide proof of homeowners insurance before closing.
Review the Closing Disclosure
About three business days before the closing date, you'll receive a document from your lender called a Closing Disclosure. You'll want to review this document carefully and ensure that you understand everything included on it. If you find an error, or if something is unclear, contact your lender immediately. Consumer Finance.gov has an interactive Closing Disclosure explainer.
Resolve contingencies
If you included any contingencies in your offer, such as a financing or home inspection contingency, ensure it is resolved.
Review the seller's disclosure
If there are known defects in the property, the seller is legally required to disclose them before closing, depending on the state law. If you find something significant that is a potential deal-breaker, it's worth investigating thoroughly. You may consider negotiating with the seller to make the repair, reduce the price of the property, or back out of the deal without losing your earnest money for significant defects.
Final walkthrough
It might be worth taking a final walkthrough 24 hours before closing. During this walkthrough, you can do a final check of the house, ensuring every agreed-upon repair has been completed and that the previous homeowner has completely cleared out of the home. This walkthrough is an important step that you should take, as any last-minute repairs can be identified and addressed.
Closing day
On the closing date, the buyer will sign a lot of paperwork including the mortgage agreement, the deed, and other legal documents. The buyer will also pay the closing costs and down payment with a bank draft or cashier's check in the exact amount.
Transfer of ownership
After all parties have signed the paperwork and the lender has transferred the funds to the seller, the house officially transfers to you, the buyer, and you will receive the keys to your house. Congratulations! You're now a homeowner.
Pro tip:
Do not make any major purchases on credit such as a new vehicle, a living room set, or new kitchen appliances that would have an impact on your credit score before you close on your mortgage.
What to expect on closing day
The house closing process can take place in the conference room of the title company, or another location of which you will receive advance notice. Your real estate agent and/or lawyer may be present to answer your questions and for support. Once you sit down at the table to sign the paperwork and finalize everything, expect to spend around two hours there. Remember to bring the following with you to the closing:
- Government identification (driver's license, etc.)
- Check for a down payment
- Proof of homeowners insurance
- Sales contract
Recording the deed
After closing, the title company or escrow agent is supposed to file your deed which shows you as the legal owner of the property within hours of the closing, but it might take a few days. You can verify that the deed was properly filed with your county within a few weeks.
What happens after closing on a house?
Congratulations! You've made it through the home buying process.
Now that you're a homeowner, you'll want to understand how your monthly mortgage payments will work. Learn about an insurance escrow account and how they work to coordinate your homeowners insurance and real estate tax payments on time each month.
Quote homeowners insurance online or call for advice
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