Buying a house is an exciting and complex process. After searching for the perfect home, negotiating the terms, and getting your offer accepted, you’re ready to close the deal. But what exactly does that entail? In this guide, we’ll walk you through the closing process, covering everything you need to know to make it a smooth and hassle-free experience.
What is closing?
Closing is the final phase of a real estate transaction. It’s the point where ownership of the property is transferred from the seller to the buyer. While this stage can seem overwhelming with its many moving parts, understanding the process and your responsibilities as a buyer will help make it a seamless transition.
How long does it take to close?
On average, the process from offer acceptance to closing takes around 45 days. However, the timeline can vary depending on factors such as the type of mortgage, property type, and whether you’re purchasing with cash or a loan. It’s important to note that the closing involves multiple parties, including the buyer, seller, lender, title company, escrow agent, and real estate agents.
What are the buyer’s responsibilities during closing?
As the buyer, you have several responsibilities during the closing process. Here are some key tasks you’ll need to complete:
Submit your application for a mortgage
Even if you’re preapproved for a mortgage, you’ll need to complete a final loan application and submit it to your lender. Be prepared for this step to take several weeks, and promptly respond to any requests for additional information from your lender.
Hire a title company
A title company plays an essential role in the closing process. They will conduct a title search, provide title insurance, open an escrow account, and manage the final closing. Research and choose a reputable title company to ensure a smooth closing.
Deposit your earnest money in the escrow account
Earnest money is a financial commitment that shows your intent to purchase the home. It’s typically 1% to 3% of the sale price and is held in an escrow account. Coordinate with the title company to deposit your earnest money securely.
Hire a professional home inspector
Arrange for a professional home inspection to assess the property’s condition. Attend the inspection if possible and address any concerns raised by the inspector with the seller.
Review the closing disclosure and respond to lender inquiries
Carefully review the closing disclosure provided by your lender, which outlines the details of your loan. Make sure everything aligns with the initial loan estimate and contact your lender if you have any questions or spot discrepancies.
Obtain homeowners insurance
Secure homeowners insurance to protect your investment. Your lender will require proof of insurance before closing.
Do a final walk-through
Schedule a final walk-through to ensure the property is in the same condition as when you made the offer. Check that all systems and fixtures are functioning correctly, and any repairs requested have been completed.
Get your finances in order
Prepare your finances by organizing necessary funds, including closing costs and a down payment. Avoid any activities that could negatively impact your credit or cash flow, such as adding debt or making significant purchases.
What are the seller’s responsibilities during closing?
While the buyer has more responsibilities during closing, sellers still play a vital role. They are responsible for filling out a written disclosure form that discloses any known issues that could affect the home’s value. This disclosure provides you with additional information and reduces the risk of future legal disputes.
How long does a closing take?
Closing typically occurs at the title company’s office and lasts between one and two hours. During this time, you’ll sign numerous documents, pay closing costs, and provide your down payment. The title company will facilitate the transfer of funds and officially transfer the property’s title to you.
What do you need to bring to closing day?
Before attending the closing meeting, make sure you have the following items:
- A government-issued photo ID
- Your copy of the closing disclosure
- Payment for closing costs and down payment (either a cashier’s check or proof of wire transfer)
- Proof of homeowners insurance policy
It’s essential to confirm the requirements with your title company and make any necessary arrangements well in advance.
How much are closing costs and who pays them?
Closing costs typically range from 2% to 5% of the home’s sale price and are primarily the buyer’s responsibility. However, sellers usually cover the real estate agent’s commission. To estimate your closing costs accurately, you can use online calculators based on your specific purchase details.
How to avoid common roadblocks to closing
To ensure a smooth closing process, be proactive in avoiding potential roadblocks or delays. Respond promptly and accurately to any inquiries from your lender or real estate agent. Avoid actions that could impact your credit or cash flow, such as taking on new debt or changing jobs.
Prepare in advance
By preparing in advance and understanding the closing process, you can make the experience stress-free. Remember, your real estate agent is there to guide you throughout the process, so don’t hesitate to seek their assistance. Before you know it, you’ll be settling into your new home!