You found a house you can afford, your offer was accepted, and you’re headed to closing. Congrats! That’s great news.
Now all you have to do is figure out what “closing” actually is and you’ll be on your way to homeownership.
You’ve probably assumed that, as the name implies, it’s the end of the real estate transaction, meaning you’ll get the keys and the title for your new house. Closing is also when you officially receive your mortgage from the bank. (It’s not necessarily the day you can settle into the house, though – your move-in date will be established in your purchase agreement.)
Closing usually takes place about 30 to 60 days after your offer is accepted, aka when you went into contract.
Here’s how to get through the process in six somewhat-simple steps:
1. Find a closing agent
There’s already a real estate agent for the buyer, and another for the seller, and now you need a closing agent, too? Yep!
A closing agent, also called a settlement or escrow agent, is a neutral third party who works for a title or escrow company. They have some rather important responsibilities on the big day, including coordinating all document signing, transferring the money and title, verifying that the purchase agreement terms have been met, and recording the deed.
Some states require a real estate attorney instead of, or in addition to, a closing agent, so ask your broker or real estate agent about the laws in your area. (Confused about the difference between a broker and a real estate agent?) But even if you’re not mandated to bring a real estate lawyer to closing, you still may want to consider it, especially if there is anything unusual about the sale. Without one, there is no one there to exclusively represent your legal interests.
For more information about closing services that are available to you, check the Loan Estimate form you received after you applied for your mortgage.
2. Buy homeowners insurance and title insurance
Real estate is the biggest purchase most people make in their entire lives, so it’s understandable to want to protect your investment.
Homeowners insurance covers damage from accidents like falling trees and fires, whereas title insurance protects the property from unwarranted claims to it. Similar to auto insurance, homeowners and title insurance both come with different coverage levels, but most lenders require at least the minimal policies. However, while homeowners insurance is an ongoing expense, title insurance is a one-time fee that is generally included in the closing costs.
3. Prepare your documents
You probably didn’t think this was possible at this point in the homebuying process, but you need to get even more documents together for closing. Your lender will either want to see these in advance or on the date, so ask your loan officer for specifics. These papers typically include:
- Photo ID
- A list of your addresses for the past 10 years
- A cashier’s check for “cash to close” (closing costs and down payment), if you haven’t paid them already
- Blank checks, just in case
- A clear title report
- Proof of an appraisal figure that’s at least the amount of the loan
- Documentation of your income
- Copies of your homeowners and title insurance policies
4. Read the Closing Disclosure
This nationally-standardized, five-page form is so important that federal law requires your lender to give it to you at least three business days before closing so you have time to read it. It lists your loan terms, your projected monthly payments, and your closing costs (some of which will likely be paid by the seller). The numbers in your Closing Disclosure should be similar to what was in the Loan Estimate back when you applied for the loan. Something not matching up? Contact your lender immediately.
5. Do the final walk-through
Your real estate agent will schedule a final walk-through of the house ideally within 24 hours before closing. The purpose is to make sure the seller is leaving the property in the condition you agreed to. If the seller was supposed to do anything major, have the work inspected by a professional before the walk-through. And if anything is wrong, it could delay your closing, but making sure your concerns are addressed will be worth it.
6. Go to closing
You made it! The last step of closing is the legal transfer of the property to you. Closing is usually held at the settlement company’s office and takes about an hour or two. It’s likely that several people will attend, including your real estate agent, attorney (when applicable), a representative from your lender, and whoever is there on behalf of the seller. But don’t feel outnumbered by the crowd. If you’re well-prepared, this meeting should go smoothly, and then you can celebrate!
- Wondering about your safety? Here’s a guide to home closings during COVID-19.
- Still in need of mortgage assistance? Our post on the steps to take out a mortgage will walk you through it.