What Happens on Closing Day?

You finally made it! It is almost time to close on your new home. To help you get ready for the big day, we will explain how to prepare, things to watch out for, and what you can expect as a buyer on closing day. 

Reviewing the closing disclosure

At least 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

• Property address

• Interest rate

• Loan amount

• Loan type

• Loan terms

• Seller-paid closing costs

• Lender-paid closing costs or credits

• Borrower paid closing costs

• Cash to close

The Consumer Finance Protection Bureau (CFPB) provides a sample closing disclosure with definitions and explanations you can use when reviewing your closing disclosure.

When your closing disclosure arrives, give your lender a call to go over the document and and discuss any questions you have. This can be a complex document, so it is wise to view it together.

What to do before closing

Preparation is key to having a successful closing day. As a borrower, you need to be proactive to make sure you know what you need, when you need it, and where to go. Here are some tips you can follow as you get ready:

• Contact your closing agent (title and escrow company, attorney, or mobile notary) to see what you need 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, cashier's check, or wired funds). Do not plan on using a personal check or money order.

• If you are going to a title company or attorney’s office, make sure you know where it is and how long it takes to get there. 

• 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 are wiring funds, beware of wire scams. When wiring money, the day of closing or before, you need to be in close phone contact with your lender and title company.

What to bring and expect on closing day

On the big day, take your time to get ready. Make sure to eat something and take a deep breath. If everything goes smoothly, closing typically takes between one and a half to two hours. 

You will need to know where you are going for closing or, if it is a mobile closing, confirm the appointment. Make sure all borrowers bring their IDs, and you may also need to bring proof of homeowners insurance. Bring anything else your closing agent told you is needed, as well as your closing disclosure to confirm the numbers.

The first thing you will do is produce your identification. Then you will start signing a stack of documents. Your closing agent should explain each piece of documentation to you. If there is something that you do not understand, do not hesitate to ask questions. If something does not seem right, for example, if the interest rate is wrong or there is a pre-payment penalty you did not know about, do not sign the paperwork until you get the issue resolved.

Closing on the loan is a big deal, and you want to make sure everything is correct.

What could delay or derail closing on a home purchase?

Keep in mind, even under the best of circumstances, errors sometimes occur. This transaction can include many different parties including buyers and sellers, real estate agents on both sides, the mortgage lender, a title or escrow company, real estate attorney and a lender's attorney. If any one of these parties make a mistake, the closing can take longer.

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 did not arrive on time

• Unknown liens on the title

• Problems with the final walkthrough

• The buyer forgot the closing cost funds

• Wire scams occur, and closing funds are lost

That is why it is vital to work with a lender, real estate agent, and closing agent who are trustworthy and have good reputations. 

What you will sign at closing (and why it matters)

Signing all of the paperwork at closing will probably take the most time since there is a lot to review, but every document plays an important role. Here are a few of the key items you will see:

• Promissory note: Your promise to repay the loan

• Deed of trust (or mortgage): Gives the lender a legal claim to the property if you default

• Closing disclosure: Confirms final costs and payments

• Loan application: Final version for lender’s records

• Escrow and tax documents: Outlines how your taxes and insurance are paid

You may be eager to have the keys to your new home, but it is important to take your time. You should read through each document carefully and ask questions before signing anything you are unsure about.

What happens after closing?

Once the closing documents have been signed and the funds are transferred, you will officially own your new home. However, there are a few additional steps that happen behind the scenes:

• The title company will record the deed with your local government
• You will receive keys to your new home (sometimes the same day, but you may also have to wait until the next)
• You may get a welcome packet with payment details and homeowner information
• Your lender will send loan servicing info (where to send payments)

Then it is time to celebrate your new status as an official homeowner!

Signed to settled: Welcome home

Though closing day marks the end of the homebuying journey, it is the beginning of your life as a homeowner. Once it arrives, take a deep breath, sign the paperwork, and get the keys to your new home. Then you can enjoy the fruits of all your hard work over the last few months. Best of luck in your new house!