Closing on a House: What to Expect and How to Prepare

Once your offer to buy a home has been accepted, it's time to lock down all the details and close the deal. That’s what closing is all about. In this article, we’ll walk you through what to expect and what you can do to help make the whole process go as smoothly possible.

What does “closing on a house” mean?

The closing process begins once you’ve signed a purchase and sale agreement, also known as a purchase contract, with a seller.  This agreement is written up and signed after a buyer and a seller mutually agree on the price and terms of a real estate transaction. Depending on state laws, either a real estate agent or a real estate attorney will prepare the Purchase Contract. The process is completed on closing day, which is the day your loan officially closes with your lender. The whole process typically takes 30 to 45 days to complete.

Keep in mind that the mortgage closing process may vary slightly depending on your location and specific circumstances. It's essential to communicate effectively with your lender, real estate agent, and any other parties involved to make sure you have a smooth and successful closing.

What are typical closing costs for a homebuyer?

The typical mortgage closing costs are between 2% and 5% of a loan’s purchase price. Sample numbers appear below. 

Closing checklist

Here’s a checklist of your to-dos during the closing period — from when you sign a Purchase Contract with a seller — all the way up to closing day. It involves several steps and requires careful attention to detail.

• Prepare your documentation: Gather all the necessary documentation your lender requires. This typically includes proof of income, tax returns, bank statements, identification documents, and information about the property you’re buying.
• Review your loan estimate: It will outline the terms of the loan (including interest rate), closing costs, and monthly payments. Review it carefully and ask your lender for clarification if you have any concerns or if anything is unclear.
• Schedule a home inspection: It's a good idea to conduct a professional home inspection — and maybe radon and termite inspections too — to identify any potential problems with the property. The inspection report will help you make an informed decision and negotiate repairs or adjustments with the seller if appropriate.
• Lock in your interest rate: If you're satisfied with the interest rate offered by your lender, consider locking it in to protect yourself against potential rate increase. Make sure you fully understand the terms of the rate lock and any associated fees.
• Get homeowners insurance: Before closing day, you'll need to secure homeowners’ insurance and give your lender proof of coverage. Shop around for the best rates and coverage options.
• Complete the underwriting process: Underwriting is the process by which your lender verifies your income, assets, debt, and property details in order to issue final approval on your loan application. The lender will verify your financial information, order an appraisal to assess the property's value, and evaluate your loan application. It's essential to promptly provide any additional documentation or information requested by the lender to keep the process moving smoothly.
• Conduct a final walkthrough: Before closing day, schedule a final walk-through of the property and make sure that 1) it’s in the condition you agreed upon with the seller and 2) any negotiated repairs have been done.
• Receive the closing disclosure: The lender will give you a closing disclosure at least three business days before closing. Review it carefully and compare it to the loan estimate to make sure they match.
• Schedule the closing: Coordinate with your lender, the seller (if applicable), and a closing agent or attorney to schedule your closing date, time, and location.
• Know how much you’ll have to pay in closing costs — and how you’ll be paying (cashier’s check, certified check, wire transfer, etc.).

What to expect on closing day as a buyer

Closing day is when the real estate transaction gets finalized — and you get your keys. It typically happens 30 to 45 days after you sign a Purchase Contract with your lender. Most closings take place at the office of a settlement agent. It can be the title company (the company that insures your ownership of the property) or, in some states, the lender's office or escrow company.

The closing day process itself may take several hours. Get ready to sign a mountain of paperwork. Some settlement agents have adopted paperless closings, but the industry has been slow to change, so it’s more than likely that you’ll be signing hard copies.

Pro tip: You don't want to fly solo on closing day. It's important to have professionals representing your interests. After all, you'll be signing plenty of papers and making what might be the biggest purchase of your life. Make sure you understand the details of everything you sign. Here are some things to be aware of on closing day to help avoid glitches.

At the closing, you’ll:

• Review and sign the mortgage note, deed of trust, and other legal paperwork.
• Pay any remaining closing costs and fees. It’s a good idea to bring a government-issued ID, a certified check for the closing costs, and any other documents your lender requires.

Once all the papers are signed, you've secured your mortgage and then the closing is officially complete.

What to do after you close on a house

Once you’re officially closed, your lender will typically fund the loan, and ownership of the property will transfer to you. Keep copies of all the closing documents for your records. Then:

• Schedule utility transfers.
• Complete a change-of-address form with the post office.
• Follow up on any other post-closing details.

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