What to Expect When Closing on a House

Closing on a house marks the final legal step in the home-buying journey, where property ownership officially transfers from the seller to the buyer. Understanding each phase, from initial preparations to post-closing activities, can help ensure a smooth transition.

Final Preparations Before Closing Day

As closing day approaches, homebuyers should make several preparations. A final walkthrough of the property, typically within 24 to 48 hours before closing, confirms the home’s condition and that negotiated repairs are complete. Verify all systems are operational and no new damage has occurred.

Buyers must also gather identification and funds. A government-issued photo ID, such as a driver’s license or passport, is required for identity verification. If a name has recently changed, supporting documentation like a marriage certificate may be needed. Funds for the down payment and closing costs, known as “cash to close,” must be a cashier’s check, certified check, or wire transfer.

Proof of homeowners insurance is mandatory. Lenders require an active policy, and buyers typically pay the first year’s premium at closing. Buyers should also bring a copy of their purchase contract and any other documents requested by their lender or closing agent. Reviewing the Closing Disclosure form, which outlines all final loan details and costs, is crucial before the meeting.

Understanding Closing Costs

Closing costs are fees associated with the home purchase, paid at closing. These expenses generally range from 2% to 5% of the total loan amount or purchase price. For example, a $400,000 loan might incur closing costs between $8,000 and $20,000.

Common types of closing costs include:

• Loan origination fees: Charged by lenders for processing the mortgage application, typically 0.5% to 1% of the loan amount.
• Appraisal fees: Cover the cost for a licensed appraiser to determine the home’s value.
• Credit report fees: Charged for obtaining the buyer’s credit history.
• Title insurance: Protects the lender and potentially the homeowner against claims questioning property ownership. The owner’s policy is optional, while the lender’s policy is required.
• Escrow fees: Paid to a neutral third party (e.g., escrow company or attorney) who manages funds and documents until conditions are met. These often range from 1% to 2% of the purchase price.
• Recording fees: Charged by local government to register the new deed and mortgage documents.
• Property taxes: Often prepaid at closing, covering a few months to a year, and held in an escrow account.

While buyers generally pay most closing costs, sellers often cover certain expenses like real estate commissions or agree to pay a portion of the buyer’s costs as a concession.

The Closing Meeting and Document Signing

The closing meeting legally finalizes the home purchase through document signing. Key individuals present include the buyer, seller, their real estate agents, and a closing agent or attorney. A lender representative may also attend. The meeting involves reviewing and signing various legal and financial papers.

One important document signed is the Closing Disclosure, a five-page form provided by the lender at least three business days before closing. This document details the final loan terms, projected monthly payments, and all associated closing costs. It allows the buyer time to compare it against their initial Loan Estimate and identify discrepancies. Significant changes, such as an APR change beyond a certain threshold or a prepayment penalty addition, require a new three-day review period.

The buyer signs the promissory note, a legally binding promise to repay the loan amount, detailing the interest rate, payment schedule, and terms. This establishes the borrower’s debt and the lender’s right to collect payments. Concurrently, the mortgage or deed of trust is signed, granting the lender a legal claim against the property as collateral until the loan is repaid. The deed, which legally transfers property ownership from seller to buyer, is also signed.

After the Closing

After all documents are signed, keys are typically handed to the new homeowner, marking the physical transfer of the property. However, legal finalization extends beyond the meeting.

A crucial step after closing is recording the deed with the appropriate local government office, such as the county recorder’s office. This updates public records to reflect new ownership and ensures the transaction is legally recognized. The closing agent or attorney usually handles this. Buyers should anticipate receiving final copies of all signed documents, including the deed and mortgage, in the weeks following closing.

The first mortgage payment is generally due on the first day of the second month after closing. For example, if closing occurs on June 15th, the first payment would be due on August 1st. This is because mortgage interest is paid in arrears, meaning the first payment covers interest accrued during the preceding full month. Buyers will have paid any prorated interest from the closing date through the end of that month as part of their closing costs.