Home Closing Process Explained
Erica GellermanFebruary 14, 2020
You’re buying your first home, you’ve had an offer accepted and you’re eager to get the keys and finally move in. Buying a home — especially your first — can be a long process where you learn what to do as you go.
But now you hear that things aren’t final until you close on the home. What happens on closing day? And does closing day mean you’ll finally be able to move in?
Here’s what to expect on closing day and how to prepare yourself so it’s a smooth process that has you moving into your new home as quickly as possible.
What Is A Closing Date?
You ‘ve been patiently waiting for your closing, but what exactly is it? The closing process typically has two parts: finalizing details on your loan and finalizing details on your home.
When you close on your loan, the loan becomes final and the money is disbursed. When you close on your home, you become its legal owner. These two things usually happen at the same time. So on your closing date, your mortgage loan becomes final and you get the keys to your new home.
How Long Does A House Closing Take?
The entire process of closing on a home requires some patience. Ellie Mae, a technology company that provides support to mortgage lenders, reports that in December 2019 the average time to close on a home purchase was 51 days.
When you are waiting to move into your dream home, 51 days can feel like a very long time.
How long does the final closing take when you reach your closing day? It depends. The process may happen in person, where everyone sits around a table and signs documents. Or it could take several weeks as all signatures are collected separately.
How To Prepare For Closing
You’re in the homestretch of buying a home — make sure you’re ready for the closing so things can go as smoothly as possible. To prepare:
- Know when and where your closing is set to take place. You’ll also want to note who is in charge of your closing: a title agent, closing attorney, escrow agent, or someone else.
- Make a list of what you need to bring to your closing. That may include ID, proof of a wire transfer or a cashier’s check for the money needed to close, your Closing Disclosure and more. The person in charge of your closing can provide you with a full list.
- Confirm the final amount you’ll need to pay at closing. You’ll find this detail on your Closing Disclosure.
- Review documents and compare your Closing Disclosure to your Loan Estimate. Make sure that your loan details are correct and that you understand all the fees.
If you have any questions that come up while you’re reviewing the documents, ask about these quickly. You don’t want to leave unresolved questions for closing day.
Who Attends Closing?
It’s hard for us to tell you definitively who will or won’t attend your closing because the answer to this question is, “Well, it depends.”
Closing procedures vary depending on where you are, because the rules dictating how a closing must be conducted are decided by the state you’re in. It all depends on what the laws are in your state and who is required to be involved in the legal transfer of homeownership from seller to buyer.
The buyer will always attend closing – after all, they’re the VIP of the whole closing process. The seller may attend, but since sellers are often allowed to sign their necessary documents ahead of time, they might decide to skip this final step in the home selling process.
If you’re purchasing your home with a mortgage, your closing will likely involve a representative from your title insurance company who will handle the closing and escrow disbursement.
However, as we already mentioned, this will largely depend on the state you’re in and the circumstances of your individual transaction.
Other parties that may be required to attend include the professionals representing the buyer and the seller, such as their real estate agents or attorneys.
What Happens On Closing Day?
The logistics of the day of your closing will depend on whether you’re meeting in an office to sign your closing documents or you’re signing them separately.
But no matter where you close, you’ll need to carefully review all of the documents and sign them as well as transfer the remaining money you owe (usually by wire transfer or cashier’s check).
On closing day you’ll:
- Receive your closing documents. There’s a lot of paperwork, so come prepared to keep it organized.
- Transfer money. You’ll need to pay your down payment as well as any closing costs. Your lender will pay the mortgage loan (the amount you’re borrowing), and the seller will receive their money. A closing agent will make sure that money is sent where it needs to go.
- Show proof of insurance. Before the lender agrees to fund the loan, they’ll want to see proof of homeowners insurance.
- Have an escrow account set up. You’ll also make your initial deposit into the account.
- Get ownership of the home. Once the money has been transferred and forms have been signed, you become the legal owner of the home.
Closing day is the end of your home buying process and arguably the most important part of it.
What Are Closing Documents?
At least 3 days before you close, you’ll receive a Closing Disclosure. The Closing Disclosure includes your detailed loan information, which you’ll want to compare with your Loan Estimate to make sure everything looks correct.
It includes things like your loan amount, interest rate, services you’re paying for, and costs you’ll need to pay at closing.
If something looks incorrect, it’s important to ask about this before getting to your closing. If you need help making sense of it, the Consumer Finance Protection Bureau has a Closing Disclosure guide that can help.
The remainder of the documents will be reviewed and signed during closing. These documents are:
- Promissory Note: When you sign this, you are legally agreeing to repay your mortgage and will have details of your loan.
- Mortgage, Security Interest, or Deed of Trust: This document gives the lender the right to foreclose on your property if you don’t pay the loan as agreed.
- Initial Escrow Disclosure: This form breaks down what your monthly escrow payments are and how it’s calculated.
- Right to Cancel: You’ll only see this form if you’re refinancing. It details the rules for the 3-day cancellation period you’re entitled to after you sign your refinancing documents.
Can You Move Into A House The Day Of Closing?
If you’re hoping to leave your closing with keys in hand and move right into your new home, that can happen. Whether or not you can move right into your new home depends on the terms you negotiated with the seller.
The seller may have asked for — or you may have offered — to give them a few days to move out of the house once the closing was completed. Or, you may have negotiated to lease the house back to them for a certain amount of time.
Absent of those, you can likely bring your moving truck over to start getting settled.
What Happens After Closing?
You signed the documents, you have the keys, all the hard work and stress you’ve gone through for the past couple months has culminated in this: homeownership.
So, now what?
After closing is completed, it’s a good idea to take that big stack of documents you just signed, make copies and store them in a secure spot. You may need these again in the future.
You may also consider getting the locks changed, to ensure that there aren’t any keys to your new home floating around in the pockets of strangers.
Then, you can begin the somewhat tedious process of making your move official by alerting all the necessary authorities and companies of your change of address, starting with the U.S. Postal Service.
Common Closing Mistakes To Avoid
Some closing delays are unavoidable. Maybe there’s a cloud on the title that’s taking a while to clear up or the appraisal came in low and now the two parties can’t come to an agreement on price.
However, there are some things buyers can do to make sure they aren’t unnecessarily holding up the closing process.
Make sure you’re providing all requested documentation in a timely manner. Financing issues can jeopardize your transaction, so being communicative with your lender and sending the information they ask for as soon as possible is vital for keeping the process on track.
Additionally, avoid making any big changes to your financial situation while you’re in the middle of the mortgage approval process. Putting large purchases on your credit card, applying for new credit or changing jobs can affect the terms of your mortgage or even prevent a lender from being able to move forward with your loan.
We know it’s tempting to go on a big furniture shopping spree in preparation of moving into your new home, but hold off until after closing.
Finally, don’t be afraid to check in regularly with the professionals you’re working with to make sure everything is moving forward smoothly. You don’t want a missed email or forgotten deadline on someone else’s behalf to hold up your closing.
What Does The Seller Need To Do For Closing?
The closing process is typically a little less involved for sellers than it is for buyers, but sellers should still make sure they’re staying on top of deadlines and meeting their contractual obligations ahead of closing.
If any repairs were negotiated in the purchase contract, the seller should ensure that those are completed prior to the buyer’s final walkthrough. Any other contract stipulations that the seller is responsible for should be satisfied as well, such as coordinating with the buyer’s side to get a home inspection or appraisal completed.
If you’re able to do so, you may choose to sign the necessary documents ahead of time, eliminating the need for you to be physically present at the closing.
If you do attend closing, be sure to bring things like house keys, garage door openers or keypad codes to give to the new owner. If you’re unsure about what else you might need, your real estate agent can give you more detailed information.
Finally, once you step out of your home for the last time, make sure you’ve left it “broom clean” for the new owners. That means the home is free of clutter and has been swept, vacuumed and left reasonably clean – no need for scrubbing or professionals (unless stipulated in your contract).
Closing day is a big day and is the culmination of your home buying journey. But don’t let details slip past you as you reach the end. Checking all of your documents thoroughly can help you avoid mistakes that may be costly and assure that you buy your home with confidence.