When you purchase or refinance a home, the last step in the process is called the closing. This is when you finalize all the details of the transaction. Your mortgage closing will likely be held at the office of the title company, an attorney or the lender. You review and sign all your loan documents, which could include things like a deed of trust or mortgage, the promissory note and a Closing Disclosure.
You could also send these funds in advance via wire transfer. Depending on your loan terms, you may also be required to set up an escrow or impound account to cover property taxes and homeowners insurance, in addition to your monthly mortgage payment.
You receive the keys to your new property after signing all legal documents and making the required payments. Make sure you understand the terms of each document. You should first get a sense of how much your closing costs will be from the Loan Estimate your lender provided you within the first three days after you submitted your application.
When your loan is approved, and at least three days before closing, you should receive a Closing Disclosure, which lists your finalized closing costs. You may pay some fees noted in your Loan Estimate and Closing Disclosure before closing, such as those associated with credit reports. For the rest, ask your closing agent what payment methods are acceptable. Closing day typically happens four to six weeks after you sign the sales and purchase contract, though it may take longer. The closing process itself may take several hours.
Be sure to store all of the documents you received during the closing in a safe place. You can also now change your address, meet your new neighbors and move in. Depending on your loan, you may have made a one-month mortgage payment during your closing, and learned when to make your next payment.
You probably also learned about the option to set up automatic ACH mortgage payments at closing so named for the Automatic Clearing House Network that processes the payments. One of the digital choices for paying your mortgage, ACH payments are automatically withdrawn from your bank account. You can choose the date the payment will come out of your account each month, and you can set up mobile and online alerts so you have no surprises as you make your house into a home.
The material provided on this website is for informational use only and is not intended for financial, tax or investment advice. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.
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If you prefer that we do not use this information, you may opt out of online behavioral advertising. Once all procedural formalities are over, the money and documents are moved from the escrow account to the seller and buyer, thus guaranteeing a secure transaction. A title search and title insurance provide peace of mind and a legal safeguard.
They ensure that when you buy a property, no one else can try to claim it later. If there are any claims, they may need to be resolved before the buyer gets the property. Title insurance is indemnity insurance that protects the holder from financial loss sustained from defects in a title to a property.
It protects both real estate owners and lenders against loss or damage stemming from liens , encumbrances , or title defects. While getting legal aid is optional, it's always better to get a professional legal opinion on your closing documents. The complicated jargon in them can be difficult to understand, even for well-educated individuals.
For an appropriate fee, opinion from an experienced real estate attorney can offer multiple benefits , including hints of any potential problems in the paperwork.
In some states, you may be required to hire an attorney to handle the closing. Check your state's laws. From opening an escrow account to hiring a real estate attorney, all involved services and entities cost money. These costs can snowball into a lot of cash if you aren't careful. For instance, home and pest inspections are crucial to prevent you from buying a property with hidden—and costly—problems.
Even fees for legitimate closing services can be inflated. Junk fees are charges that a lender imposes at the closing of a mortgage, which are often unexpected by the borrower and not clearly explained by the lender.
These fees can add up to a big bill. Junk fees include administrative fees, application review fees, appraisal review fees, ancillary fees, processing fees, and settlement fees. If you're willing to speak up and stand your ground, you can usually get junk fees and other charges reduced or eliminated before you go to closing.
A physical home inspection is a necessary step to discover any potential problems with the property and get a look at its surroundings. If you find a serious problem with the home during the inspection, you'll have an opportunity to back out of the deal or ask the seller to fix it.
You can also have the seller pay you to have it fixed as long as your purchase offer included a home-inspection contingency. A pest inspection is separate from the home inspection. It involves a specialist making sure that your home does not have any wood-destroying insects, such as termites or carpenter ants. Pests can be devastating for properties made primarily of wooden material.
Many mortgage companies mandate that even minor pest issues be fixed before you can close the deal. A small infestation can spread to become very destructive and expensive to fix. Wood-destroying pests can be eliminated, but you'll want to make sure the issue can be resolved for a reasonable fee. Better yet, you might be able to get the seller to pay and have pests eliminated before you complete the purchase. Pest inspections are legally required in some states and optional in others.
Even when your purchase offer has already been accepted, you may want to renegotiate the price to reflect the cost of any necessary repairs revealed by inspections.
You could also keep the purchase price the same, but try to get the seller to pay for repairs. Even if you're purchasing the property "as is," there is no harm in asking. You can also still back out without penalty if a major problem is found that the seller can't or won't fix.
Interest rates, including those offered on the mortgage, can be volatile and subject to change. Rates are subject to multiple factors, such as geographic region, property type, type of loan applied for, and the applicant's credit score.
If at all possible, it is advisable to lock in the interest rate for the loan in advance. That prevents you from being at the mercy of market fluctuations, which could cause rates to rise before you finalize your property purchase. Even a 0. Your real estate offer should be contingent upon the following five things:. Such contingencies must be removed in writing by specific dates stated in your purchase offer, a process known as active approval. However, in some purchase agreements contingencies are subject to passive approval also known as constructive approval.
Buyers must understand the approval process and take the necessary actions by the required dates. You most likely deposited earnest money when you signed the purchase agreement. If the buyer backs out, the earnest money goes to the seller as compensation. If the seller backs out, the money is returned to the buyer. To complete your purchase, you'll have to deposit additional funds into escrow. As the original earnest money is generally applied to the down payment, it is crucial to arrange for the various other required payments before the deal is closed.
Failure to do so can lead to the sale getting canceled, with the earnest money going to the seller. Furthermore, you could still be charged for the various services you used before the deal fell apart.
One of the last steps before you sign your closing papers should be to look over the property one last time. You want to make sure that no damage has occurred since your last home inspection. You should also verify that the seller has completed the required fixes and no new problems came up. Get pre-approved for a mortgage: By getting pre-approved for a mortgage early in the home buying process, buyers can assure sellers that they can indeed obtain a mortgage loan from their lender in time for closing.
Also, having pre-approval for a loan helps the closing process move faster, and lenders will often offer an interest rate lock at that point in time. Determine your closing costs: Escrow companies will charge service fees for managing your closing process.
However, buyers should closely examine the itemized list of charges in case there is room to negotiate a lower cost or eliminate any line items. Schedule a home and pest inspection: Although home and inspections are not legally required, they absolutely should be performed. Have a professional inspect the property to ensure that it does not have any underlying problems that can sneak up on you in the future.
Many home buyers will include a home inspection contingency in their purchase contract. Renegotiate the offer: If the home inspections revealed any issues and a home inspection contingency was included in your purchase contract, now is the time to renegotiate your purchase offer with the seller. You can either ask the seller to drop their purchase price or ask them to pay for any necessary repairs. In case the negotiation falls through, the home inspection contingency will protect the buyer if they choose to withdraw their offer.
Lock in your interest rate: If the interest rate on the mortgage loan were not locked in already through the pre-approval process, the buyer would also want to do so during the closing process. Lift real estate contingencies: In order for your deal to close successfully, any real estate contingencies that were put into place must be removed in writing in advance of your closing date.
Work with your real estate agent to approve and remove any contingencies as applicable. Deposit funds into escrow: To finalize your real estate purchase, you will need to deposit your down payment and pre-determined closing costs into escrow. Most likely, you will have paid earnest money upon signing the purchase agreement, which is typically applied to the down payment.
Perform a final walkthrough: Before the date of closing and any final paperwork is signed, home buyers would be smart to perform one last walkthrough of the property. This is to make certain that no damage has occurred to the property between walkthroughs and when the closing is finalized. Sign all paperwork: The final step arrives on the actual date of closing. Real estate closing should be thought of as more of a process than a specific step in the home buying process.
Use the ultimate real estate closing checklist below to ensure a smooth real estate closing process:. In fact, the more one knows about the closing on a house timeline, the better off they will be.
Although the real estate closing timeline varies case by case, it generally takes a few weeks to close a house, barring delays. If a buyer has already been pre-approved for a mortgage loan , the lender can generally process the paperwork, as well as schedule a home appraisal, in just one to two weeks. However, if the buyer has not been pre-approved, the mortgage approval process can take longer. Other common types of delays include the appraisal process, changes or errors found in credit reports, marital status changes, or issues with paperwork processing.
As mentioned above, there are a few issues that could cause delays in the closing process. These are typically associated with financing or legal matters relating to the property. Also, some problems could arise with your home appraisal, home inspection, or home loan. Your home could be praised for less than you were expecting, or you could be approved for a loan less than you were aiming for.
Sometimes your home inspection could bring more issues to light than what you expected, and this could delay the closing process. However, to help make sure your real estate closing timeline stays on track, read through the following common delays:. If this is the case, and the home is worth less than the purchase price, homebuyers may have trouble getting the final loan approved. If the sellers are set on the price, both parties can agree to have the property appraised by someone else to confirm, or the contract could be canceled.
Inspection Problems: Just like an appraisal, an official home inspection could reveal some surprises during the closing process. Most problems uncovered during a home inspection only require minor repairs; however, they could delay the closing process if larger problems arise.
A few examples include the presence of mold or insect infestations, which demand a considerable amount of attention. If this is the case, homebuyers could walk away from the property altogether or have the sellers provide the necessary repairs. Financing Problems: Lenders provide yet another set of expectations to be met during the closing process, and consequently, they can hold up the entire timeline.
The most frequent financing problems that delay a closing timeline are when buyers make an offer without approval or offer a price outside of their budget. In each of these cases, buyers may have to adjust their offers and sometimes even move on to a different property or shop around for other financing options. Buyers and sellers will undoubtedly experience a sense of relief when they finally reach the actual closing date.
The worst thing that could happen on the closing day is to delay the process any further due to a lack of preparation. To prepare properly, be sure to review your HUD-1 settlement form, and perform a final walk-through of the home to ensure that the buyer has addressed any issues that arose out of the inspection.
On the actual day of closing, make sure to gather and bring all of your real estate closing documents, a government-issued photo identification, as well as your form of payment to cover the real estate closing costs.
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