Mortgage 101

How Closing on a House Works

Published on: February 28, 2022

closing on a house

Closing on a house is the final phase of the homebuying process. If you’re approaching closing day, congratulations; you’re close to owning a home! But before you can call the home yours, you’ll have to navigate the steps of the house closing process.  

Read on to learn what to expect at a house closing and what you can do to have an organized and smooth closing procedure.

How does closing on a house work?

Closing on a house is the process of becoming the legal owner of a home. While you’ll have a scheduled closing day, the house closing process refers to everything that happens between the acceptance of your purchase offer and receiving the keys to the home.  

Here’s what you need to know about closing on a house.

What happens at a house closing?

At a house closing, many events occur simultaneously. You’ll review and sign multiple documents that transfer the homeownership from the seller to you. You’ll also commit to your mortgage, provide your down payment, and pay other closing fees.  

Also, at the house closing, the lender funds the home purchase and transfers the money to the seller, who will then sign over ownership of the property to you.  

Once all documents are signed and the funds are transferred to the appropriate parties, you’ll walk away from the house closing as the legal owner of the home. The transaction will be documented in the county registrar’s office or register of deeds.

How long does the closing process take?

The real estate closing process can be as short as a couple of weeks or several months. How long it takes depends on many factors, including your lender’s ability to close on the loan, your loan type, and any necessary repairs the seller must make before the house closing. 

How long does closing day take?

The actual house closing typically takes a couple of hours. However, some lenders offer an e-closing or hybrid closing, where some or all documents are sent and signed ahead of closing day. An e-closing can eliminate or drastically shorten the time spent in the office on closing day. Some lenders may conduct the house closing by mail or virtually as well.

Who attends the closing?

Several parties will be present on closing day, with each person playing an essential role in the closing procedure. The exact people present will depend on your state’s laws regarding the real estate closing process.  

Here’s a look at who may be at the house closing, in addition to the buyer and potentially the seller.  

  • Buyer’s real estate agent. Your real estate agent will be there to represent you and help ensure the house closing proceeds as planned. 
  • Seller’s real estate agent. The seller’s agent will be present as their representative. 
  • Settlement or closing agent. The settlement agent conducts the closing. In most cases, the settlement agent is a representative from a title insurance company, but an escrow agent or a closing attorney may conduct the house closing in some states.  
  • Buyer’s attorney. Some buyers choose to hire legal representation in addition to a closing agent. 
  • Seller’s attorney. Some sellers may choose to have legal representation present. 
  • Lender. In some cases, a representative for the lender may be present at the house closing.

House closing timeline: Steps to closing on a house

The final phase of your homebuying journey will be busy. Here’s a look at the critical steps of the real estate closing process, including what happens the week before closing on a house. 

Go through underwriting 

After the seller accepts your offer, you and your real estate agent will work together to submit the purchase agreement to your lender. Next, your mortgage enters the underwriting process. During this phase, your lender may request additional financial documents and information from you. Your lender will also order a home appraisal to assess the home’s value.

Order a home inspection 

You will be responsible for getting an inspection of the property from a licensed inspector. A home inspection may not be required for some loans, but they are highly recommended. An inspection will provide important information about the property, and in some cases, it could reveal significant issues.  Depending on the result of the home inspection, you and the seller may negotiate the contract terms, and the seller may need to complete repairs before the house closing.  

Hire closing services 

You’ll need to hire some third-party service providers to complete the real estate closing process. Depending on your state laws, this includes title services, a settlement agent (or escrow agent or closing attorney), and any other services your lender requires.   

Secure homeowners insurance 

Before closing on a house, you’ll need to get homeowners insurance on the new property and have the policy in effect as of closing day. You’ll need to pay for one year’s premium upfront in most cases. 

Review final documents 

Three business days before the house closing, you’ll receive a closing disclosure from your lender or closing agent. This document includes the final details of the loan and the exact amount you’ll need to bring on closing day.  

Other documents you can expect to see on or before closing day include:  

  • Promissory note. This document is your promise to repay the home loan. 
  • Mortgage. Also known as the security instrument or deed of trust, this document gives the lender permission to foreclose on your home if you fail to repay the loan.  
  • Deed. This transfers legal ownership of the property from the seller to the buyer. 
  • Initial escrow disclosure statement. This document breaks down how a portion of your monthly mortgage payment will go towards property taxes and homeowners insurance. 

To eliminate surprises on closing day, carefully review the closing disclosure and compare it to the initial or revised loan estimates your lender provided.  

If you have an e-closing, you may get all your closing documents before closing day. However, if you have a traditional house closing, you can also request that your closing agent send you the other documents along with the closing disclosure for your review. If you notice any incorrect information in the closing documents, let your closing agent know immediately. 

Prepare for closing day 

A few things will happen in the week leading up to closing day. If changes occur during the house closing process that affect your loan, you’ll receive a new closing disclosure to review. And typically, the day before closing on a house, you’ll do a final walk-through of the property with your real estate agent to make sure the home’s condition is as agreed.  

You’ll also need to prepare your funds for the down payment and closing costs. In most cases, you’ll either schedule a wire transfer or provide a certified or cashier’s check on closing day. Your closing agent will tell you what you need to bring on closing day.  

Once you’ve made it to the house closing, you’re just several signatures away from owning a home!

How to avoid delaying the closing process

Closing on a house involves several moving parts. And while some of the steps of the homebuying process are beyond your control, there are some things you can do to ensure the closing procedure runs smoothly and in timely manner.  

Here’s how to avoid delays as you approach closing day:  

  • Provide accurate information upfront. Make sure all financial and personal information you provide to your lender and real estate agent is accurate and consistent. Wrong information could delay the house closing process.  
  • Avoid financial changes. Opening up new credit or maxing out a credit card can affect your chances of mortgage approval and the terms of your loan. As the house closing process continues, avoid making any significant financial moves. However, notify your lender immediately if anything changes, such as a new job. 
  • Respond to requests from your lender right away. During the underwriting process, your lender may need further documents or information. Being responsive and promptly providing requested info will ensure a smooth closing procedure. 
  • Negotiate issues with the seller. If the appraisal or home inspection reveals significant problems, your lender may require that they be addressed before proceeding. Working with the seller to adjust the home price or negotiate other contract terms can avoid delays to the house closing. 
  • Look out for revised loan estimates. During the house closing process, your lender may provide revised loan estimates. While these estimates don’t represent the final loan details, they indicate any changes that have taken place since you initially applied for the mortgage. Familiarizing yourself with changes to your loan along the way will reduce the chance for any surprises on closing day. 
  • Protect yourself from scams. The real estate closing process is a frequent target for scammers. Beware of last-minute changes regarding where to wire your funds. Verify any new instructions with your closing agent directly. 

Would you like to learn more about the real estate closing process? A local Finance of America Mortgage Advisor can guide you through the steps to closing on a house.

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