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Mortgage Closing Process: 10 Steps to Expect
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The mortgage closing process is the last thing you do when buying or refinancing a home. Once you complete closing, you officially own your home or start to enjoy the benefits of a refinance. There are a number of steps you can take to ensure your mortgage closing process is as smooth as possible, and avoid possible bumps in the road.
10 steps in the mortgage closing process
1. Lock in your interest rate
Your mortgage interest rate is not guaranteed until you’ve locked it in. If you haven’t locked your rate, you may be disappointed if rates rise before your closing. Check your loan estimate to make sure your rate is locked, and keep track of the expiration date (typically 30 to 60 days after you lock). If you go past that date, it could cost you extra.
2. Review your home appraisal
If your loan requires a home appraisal, you should receive a copy of it before your closing. Review it for discrepancies in the square footage or other features to make sure it’s as accurate as possible.
3. Provide final mortgage documents
Lenders typically need the following to begin preparing your closing documents:
- Your most recent paystubs
- Your most recent bank statements
- Verbal verification of your employment
- Proof of homeowners insurance for your home
- Proof that you haven’t opened any new credit
4. Don’t change jobs
Most mortgage closing departments verify your employment right before your closing day. Any changes in your employment, income or how you’re paid could cause big delays, or even result in a loan denial.
5. Don’t deposit cash or large deposits or open new credit
If you receive a large cash housewarming gift from a benevolent relative or friend that’s not already reflected on your bank statements, depositing it could cause big problems. You may end up chasing down a gift paper trail that includes gathering up bank statements from the person who gave you the money, potentially delaying your closing.
Don’t make the mistake of applying for “same-as-cash” furniture credit card discounts or adding big charges on any of your cards; lenders will check your credit before closing and a large increase in your payments could create qualifying problems.
6. Review your initial closing disclosure
Federal guidelines require you receive a closing disclosure at least three business days before your closing date. Have your initial loan estimate handy to compare what you were originally quoted with the final figures. As you review the numbers make sure you’re:
- Getting credit for any fees you already paid (like for an appraisal or pest inspection)
- Getting lender credits applied to fees for a low- or no-cost mortgage offered by your mortgage company
- Receiving credit for costs the seller agreed to pay
- Receiving your expected interest rate and closing costs
- Asking your loan officer about any discrepancies or unfamiliar charges
- Requesting any changes to the loan amount or interest rate before the next step
7. Confirm you are clear to close
Once all the conditions to your loan have been satisfied, your lender will usually issue a “clear-to-close” or CTC notice. That means the lender can begin preparing your final closing documents for you to sign at the closing table. By this step, you should have finalized your loan amount and interest rate. Any changes could cause delays and require you to sign new disclosures.
8. Verify the final amount you need at closing
Once the lender’s closer completes your closing documents, they will be sent to a title company or attorney (depending on where you live) to prepare for your signing. Your loan officer, an escrow officer or attorney will contact you with the final amount you need to pay. If you’re receiving funds from a cash-out refinance, bring your bank information if you want the funds direct deposited or wired into your account.
9. Review and sign your paperwork
Your closing may be scheduled at a title company, attorneys office or with a notary at a place you choose. Some lenders offer eClosings that allow you to electronically sign some or all of your documents with a laptop or desktop computer. You’ll need some form of identification. Take time to review the paperwork and ask questions about any form you don’t fully understand.
10. Get your new home keys or refinance benefits after your loan records
The mortgage closing process is not officially done until the mortgage funds are received and the loan is recorded on your home in your name. Once that happens, you are officially a homeowner and can get your keys.
With a refinance on your primary home, there’s an extra three-day right of rescission waiting period before your loan is officially “closed.” If you decide — before midnight on the third business day after you sign — that the refinance benefit isn’t worth it, you can cancel. If everything looks good, your loan will fund after the third day.
THINGS TO KNOW
Americans have been scammed out of millions of dollars due to mortgage wire fraud. Hackers take on the identity of a loan officer, title officer, attorney or real estate agent and send a notice that the wire information has changed from a “spoof” email address that looks legitimate. Unsuspecting borrowers send their closing funds to the bank in the instructions and often lose their money with little recourse.
To avoid being a victim of wire fraud:
- Request an email of the wiring instructions directly from the title company or attorney
- Always confirm the instruction information over the phone and confirm it with your lender as a backup
- Get a cashier’s check instead of wiring your funds
What could go wrong in the mortgage closing process?
- Your seller credits might not be applied. Don’t sign your final loan papers if your final disclosure doesn’t show seller credits at closing. This might delay your closing, but it’s worth it to make sure you don’t pay more closing costs than you agreed to.
- You might be charged for something you already paid for. Sometimes paid invoices don’t make their way into the closing package. If you paid for an appraisal or termite inspection upfront, your loan officer should be able to grab an invoice to make sure you aren’t charged for it twice.
- Your costs might be higher due to something that changed. A lower-than-expected appraised value, a drop in your credit score or higher loan amount could result in more charges than you expected. You should be notified of these changes before closing, and you aren’t obligated to sign if you don’t think you’re getting the best mortgage rate and terms possible.
- Your home might not pass the final inspection. This can happen if you negotiated for repairs based on your home inspection that aren’t completed when you’re ready to close. It’s better to delay the closing until the home is fixed to your specifications than let it slide and try to chase the seller down for repairs after you’ve already moved in.
- Your lender might not be able to verify your employment on closing day. Give your employer a heads up before closing, so they are prepared to verbally verify your income on your closing day. Most lenders won’t release your documents for closing unless they’ve completed this verification.
FAQs about the mortgage closing process
How long does funding take after closing?
It may take hours to days before you get your mortgage funds after your closing, depending on whether you live in a “wet” or “dry” state. In a wet state, your funds are sent with all of the loan and contract paperwork, which means the funds are available when you sign your paperwork. Dry states don’t allow you to get funds until signed documents are sent and reviewed, which could mean a day or two delay before you get your loan funds.
How long does it take to sign closing papers?
Signing your papers can take a matter of minutes or hours, depending on how many questions you have about those documents.
Is the closing conducted by the seller’s agent?
With a purchase loan, the contract will determine who handles your closing. You can select a title company or attorney, but the seller can refuse to accept your offer if they prefer their own closing company.
Can you move into a house before closing?
In most cases, no. Discuss any plan to move in before closing with your real estate agent; the seller will need to give written authorization and may add extra conditions to the contract (such as daily rent or proof that your homeowners insurance is in effect) before they agree to this type of arrangement.