November 5, 2021
You’re finally there! It’s almost time to close on your new home. Before the big day arrives, it’s smart to know what happens on closing day for the buyer. That way, you’ll be prepared. Today we’ll talk about getting ready, things to watch out for, and what to expect during closing. Read on for the details.
Closing Disclosure — 3 Day Rule
Three business days before you close, your lender will supply you with a Closing Disclosure (CD). Make sure to read it carefully and compare it to your Loan Estimate (LE). The main points to double-check for accuracy are:
- Borrower names
- Borrower addresses
- Interest rate
- Loan amount
- Loan type
- Loan terms
- Seller concessions
- Closing costs
- Cash to close
The Consumer Finance Protection Bureau (CFPB) explains the closing disclosure page by page on their website.
When your Closing Disclosure arrives, give your loan officer a call to go over the document and get any questions answered. This can be a confusing document, so it’s wise to view it together.
Before Closing Day Tips
Having a successful closing day depends on preparation. As a borrower, you need to be proactive to make sure you know what’s needed when — and where to go. Here are some excellent tips you should follow:
- Contact your closing agent (title and escrow company, attorney, or mobile notary) to see what they need you to bring with you to closing.
- If you need to bring money for closing costs, find out what form of payment is acceptable (certified check, cashiers’ check, or wired funds). Don’t plan on using a personal check or money order.
- If you’re going to a title company or attorney’s office, make sure you know where it is. Do a dry run if necessary and see how long it takes to arrive.
- If you have a mobile notary, confirm the date and time.
- Have your final walkthrough to inspect the property. This usually happens 24 hours before closing.
- If you’re wiring funds, beware of wire fraud. When wiring money, the day of closing or before, you need to be in close phone contact with your lender and title company.
Wire Fraud Cautions
One of the most common frauds taking place is wire fraud for mortgage closings. Here’s what happens, criminals hack into the email of title and escrow companies and law offices. Right before closing, they email the borrower and tell them there’s been a change of plans for where they need to send the money. If the borrower follows the hacker’s instructions, their money is gone, and nothing can be done about it.
If you’re wiring funds, get the email instructions several days before closing from your lender. Call whoever is doing the closing and confirm the instructions. Make sure you’re calling the number your lender supplied. Then, when you go to wire the funds, call that same number again and confirm. Once you’ve wired the funds, call again and confirm they’ve received the wire.
You need to be on top of this — otherwise, you could lose thousands of dollars. Never change where you’re going to wire the funds based on an email. And don’t call the phone number on an email with a different set of instructions. No matter what, always be in close phone contact with your lender and closing agent.
How long does closing day take?
According to Zillow, closing takes anywhere from 1.5 to 2 hours. That is as long as everything goes smoothly.
Keep in mind, even under the best of circumstances, errors can occur. Many different people are part of the sales transaction. These include buyers and sellers, real estate agents on both sides, the mortgage lender, title and escrow company, or real estate attorney. If any one of these people drops the ball or makes a mistake, the closing can take longer or go off the rails.
Here are some of the most common things that can go wrong at a closing.
- Inaccurate Closing Disclosure
- Loan document errors and misspellings
- Loan documents don’t arrive on time
- Unknown liens on the title
- Problems with the final walkthrough
- Seller or buyer passes away
- There’s a natural disaster
- The buyer forgot the closing cost funds
- Wire fraud occurs, and closing funds are lost
That’s why it’s vital to work with a lender, realtor, and closing agent that you can trust and has a good reputation.
Closing Day Checklist
On the big day, take your time to get ready. Be well-fed, and take a deep breath. Follow these tips:
- Know where you’re going for closing
- If it’s a mobile closing, confirm the appointment
- Make sure all borrowers bring their IDs
- You may need to bring proof of homeowners insurance
- Bring anything else your closing agent told you is needed
- Arrive in plenty of time
- Bring your Closing Disclosure to confirm the numbers
What do you do at closing?
For a purchase, sometimes sellers and buyers come in separately and sign their papers, and other times all parties meet at once.
Although these steps can vary slightly from state to state, this is generally what occurs on closing day:
- The ownership and property title gets transferred to the buyers from the sellers.
- The buyers will sign a stack of documents prepared by the escrow company, closing agent, or real estate attorney.
- The buyers will pay any closing costs that are due.
- The closing agent distributes funds to the real estate agents and vendors that still need to be paid.
- The buyers get the keys to the property.
The first thing you’ll do is produce your identification. Then you’ll start signing a stack of documents. Your closing agent should explain each piece of documentation to you. If there’s something that you don’t understand — ask questions. If something doesn’t seem right, for example, if the interest rate is wrong or there’s a prepayment penalty you didn’t know about, don’t sign the paperwork until you get the issue resolved.
According to NerdWallet, the primary closing paperwork includes:
- The promissory note. It’s a written promise that you’re going to pay a specific sum to a bank or individual on a certain date.
- The mortgage (sometimes called a security instrument or Deed of Trust) gives your lender the right to take the property back (foreclose) if you don’t pay.
- Escrow disclosure details what your monthly payment will consist of. For example, principal, interest, property taxes, homeowners insurance, and private mortgage insurance.
- Right-to-cancel document giving you three business days to cancel the whole deal- only applies to refinancing.
- Closing on the loan is a big deal, and you want to make sure everything is correct.
Closing Day FAQs
- Q: How many days before closing do you get mortgage approval?
- A: Ideally, the sooner, the better, but on average, you’ll get final approval one to two days before closing.
- Q: Can you move in on the closing day?
- A: Yes, you can if everything goes well on closing. But you might plan on moving in the following day.
- Q: How many days before closing is credit pulled?
- A: It depends on your lender, but some lenders pull credit right before the final approval, which could be one or two days before closing.
- Q: Do lenders pull credit day of closing?
- A: Not usually, but most will pull credit again before giving the final approval. So, make sure you don’t rack up credit cards or open new accounts.
- Q: Do lenders verify employment on the day of closing?
- A: It’s possible and is at the lender’s discretion. That’s why it’s important not to change jobs until you have the keys to your new house and your loan is 100% closed.
- Q: How many days between the loan estimate and closing disclosure?
- A: The number of days between the LE and CD can vary but, the LE must be delivered no later than the seventh business day before closing .The initial loan estimate goes out no later than the third business day after your lender receives your application Then three days before you close, you receive the closing disclosure.
- Q: Can I waive the three-day closing disclosure?
- A: If the loan is needed before the waiting period to meet a bona fide personal financial emergency, you may be able to waive it with a signed and dated written statement. This is very rare and additional restrictions apply. Check with your lender for more information.
- Q: How many days after closing is the first mortgage payment due?
- A: It’s different for every loan, but when you sign your paperwork, you’ll find out when your first mortgage payment is due.
Once the closing day arrives, take a deep breath, sign the paperwork, and get the keys to your new home! Now you can get ready to enjoy all the hard work of the last few months. Best of luck in your new house!