What to Expect When You Close on a House

After you’ve found your dream home, been approved for financing, and passed all of the hurdles that come with purchasing a property (like inspections and appraisals), you get to take a little breather.

The final milestone on your way to becoming a homeowner is closing on your property. Once you’ve gotten this far, you’re likely just days away from starting a new adventure as a homeowner.

Unclear about what closing entails? We’re here to make it a little easier for you.

What Does It Mean to “Close” on a House?

Closing on a property refers to the last step of the buying/selling process in real estate.

This final step ends with the keys to the home in your hand. Your relationship with this home started with a contract you and the seller both signed. This contract opened the sales process and established an arrangement between you and the previous homeowner. This “closing” contract is the caboose to your real estate transaction train.

What Steps Must Happen Before Closing?

Your purchase document will have contingencies that you must meet before the contract is legally binding.

As a buyer, these contingencies can ensure your home is in the best shape possible when you take possession.  Common contingencies in a real estate contract include:

• A home inspection: The purpose of the inspection is to make sure there are no hidden problems. In many cases, you can back out of a purchase offer without losing earnest money if you decide the property doesn’t meet your standards.
• Appraisal: Most (if not all) lenders will require a home inspection and appraisal before they agree to finance your purchase. An appraisal tells you and your lender how much the home is worth. Most lenders make a loan that exceeds the value of the house. Your lender may also look for any liens on the property.
• Financing: Even if your lender pre-approved you for a loan, they may require additional documentation before finalizing the loan. Make sure you have the contract for your purchase, pay stubs, tax documentation, bank account information, assets, and any other income information set aside so you can provide them quickly.
• Final walkthrough: Before closing, you’ll get the chance to walk through the property one more time. The final walkthrough usually happens a day or two before closing. During the walkthrough, the house should be completely cleared out, and the condition should meet your agreed condition. You’ll want to look at all of the appliances, light fixtures, toilets, and windows.
• Closing disclosure: Your lender will send you a closing disclosure form at least three days before the closing date. The disclosure outlines the terms of your loan, including the closing costs and which party is responsible for the closing costs.

What Happens at Closing?

The closing will likely take place at the title company (since they are holding the title of the home in escrow). The following will occur during your meeting:

• You (or the seller) pay closing costs
• The seller signs transfer documents, giving you ownership of the property
• You sign a settlement statement, mortgage agreement (agreeing to repay the loan), and a mortgage deed of trust
• The title company registers the deed in your name

Plan to spend an hour or more at the closing.  You’re going to go through a surprising amount of paperwork during closing (as in, 50+ pages). Make sure you read your paperwork and ask any questions at that time because these papers are legally binding contracts.

What Documents Should I Bring?

Come prepared for your closing appointment. Documents and items that you’ll need to have on hand include:

• Photo identification
• Documents or paperwork for the title company, loan office, and agent
• A cashier’s check for closing costs that you owe
• Proof of homeowner’s insurance

Closing costs will vary based on the fees your title company, real estate agent, and appraiser charge. On average, closing costs are 3 to 4% of the purchase price of the home. So, if you paid $350,000 for a home, your closing costs could be between $10,500 and $14,000.

What Happens After Closing?

Depending on your local laws, you may be able to move in the same day as the closing, or you might have to wait until the transaction is registered, which could take two to three days. Your real estate agent will be able to give you information about the laws in your area.

Closing on a home is exciting. The closing process is a bit of a formality where you and the seller both sign paperwork and finish paying closing costs. However, it’s also the last time you’ll have the chance to make sure everything in your contract matches agreed-on terms. So take your time, and enjoy the process!