House Closing Process: 8 Steps Before You Get Your Keys
In many ways, closing on a home is a team effort: Your real estate agent, mortgage lender, title company and seller work together to help you reach the homeownership finish line. The days leading up to that big moment can either feel like a marathon or a sprint, depending on how well you, and your team, understand and prepare for the house closing process. These steps can help you make sure you’ve cleared all your financial hurdles and are ready to take ownership of your new home.
What is the house closing process?
The closing process is a series of steps you take to officially own your home, and in the next section, we’ll explain the ones that you and your homebuying teammates need to take leading up to your closing day.
For your lender, it’s their due diligence period to make sure your credit, employment and money are acceptable before sending your mortgage papers to the closing table. In most cases, your real estate agent will schedule a final walkthrough to make sure the house is in tip-top shape.
By now you’ve locked in your mortgage rate, set aside your down payment and closing cost money and given your lender the last-minute paperwork they need to prep the mortgage docs you’ll sign.
How long does it take to close on a house?
It can take anywhere from a matter of days to several months to close on a home. If you don’t need a mortgage, you can close once you’ve checked out the property and put down your cash. If you’re getting a mortgage, it usually takes up to 60 days.
Following these eight steps can help you speed up the process to getting your keys:
Step 1: Finalize your homeowners insurance
It might seem like a simple thing, but lenders can’t finish your closing documents until you’ve decided on a homeowners insurance company. That’s because your homeowners insurance premium is part of your closing costs and your monthly PITI payment.
Without a finalized premium, your closing will be in limbo. Once you’ve shopped for and found the right coverage at the right price, quickly get the info to your lender.
Step 2: Decide on your title vesting
Your loan documents aren’t complete until you finalize your title vesting, which is a legal roadmap for what happens to a home after one or several owners die. The most common title vesting types are joint tenancy with right of survivorship (JTWROS) or community property with right of survivorship. Here’s a quick description of each:
- JTWROS is popular for married couples, though it can apply to any home owned by multiple people. With this type of vesting, if an owner dies, their ownership rights automatically pass to the living owner, instead of being decided by a court.
- Community property with rights of survivorship is only for married people. You must disclose your marital status accurately. If you were recently married, you may need to bring a copy of your marriage license to the closing.
Step 3: Review your loan closing documents
There’s a bunch of paperwork to review in the house closing process, and the closing numbers may be a bit confusing. But you’ll have time to review it all before signing: Your closing disclosure with the final numbers must be sent to you three business days before your closing date.
Here’s what to look for on your closing disclosure:
Credits for costs you’ve already paid. A credit should always reduce the amount you need at closing, and is reflected as a negative number on your closing disclosure. If you paid upfront for an appraisal, application and credit report fees, those payments should be reflected on your final closing disclosure. You should also see a credit for your earnest deposit (money you paid when your contract was accepted).
Credits for costs your lender or seller agreed to pay. If your seller is covering a percentage of your costs, you should clearly see that on the disclosure. Check on any fees or credits from your lender, especially if you chose a no-closing-cost mortgage.
Final rate, payment and lender fees. There should be no (or very little) difference in the numbers on the initial loan estimate and the final closing disclosure. If there is, contact your loan officer and ask for clarification.
Review your final title report
Step 4: Avoid any major life changes
Change is never a good thing in the house closing process, especially when it comes to your mortgage. Lenders vet your application multiple times, and any of the following mistakes could delay your closing. In some cases, your loan approval could even flip to a denial.
Here are some absolute “don’ts” during the house closing process:
Don’t change jobs or income. Your loan approval is based on the job and income provided in your initial loan application. The underwriter approves your loan with the pay stubs and W-2s you share during the loan process. If you get a new job or salary, they’d also have to approve those before your closing.
Don’t make large deposits or open new credit. All of the money you need for closing should be disclosed and already in your account when you initially apply for your mortgage. Even if you get a last-minute cash gift from a relative, hang on to it until after you’ve moved into your house. Those “same-as-cash” home improvement credit cards may be tempting, but your lender flags any new credit inquiries, which can negatively affect your credit score. Don’t open new credit accounts until you actually own the house.
Step 5: Get your closing cost dollars ready
Once your lender delivers your mortgage paperwork for closing, an escrow officer (or attorney, depending on where you live) tells you the final check amount. Most buyers come to closing with a cashier’s check or wire the funds directly to the escrow company handling your purchase; it’s never sent directly to the seller.
Check with your bank if you’re wiring funds — it may take a day or two before the money’s delivered, so plan accordingly. Give yourself extra lead time if you’re borrowing money from a 401(k) or investment fund.
Warning about wire fraud
Aspiring homeowners have lost billions of dollars due to wire fraud schemes in recent years. The fraudsters impersonate loan officers, real estate agents and escrow employees and typically send emails with new or revised wire instructions. Always confirm your wire information in person or on the phone with your loan officer and escrow agent.
Step 6: Plan for your walkthrough
Your real estate agent schedules a time for you to walk through the home to confirm it’s move-in ready. Repairs that were negotiated as part of your contract should all be finished.
If the current owner recently moved out, look out for scuffs and nicks on the walls and floors. You still have time to ask them to be spruced up before you sign the closing papers.
Step 7: Gather your documents and questions for closing
Bring two forms of valid ID for your signing and at least one picture ID. Voter registration, passports and Social Security cards are acceptable second forms of ID. Also have your cashier’s check ready unless you’re wiring your funds.
The following is a list of questions you may want to ask at the closing:
- Where do I pick up my house keys?
- What are the contact numbers for utilities (electric, cable, internet, water, sewer, etc.)?
- When is my first mortgage payment due?
Step 8: Sign your papers
Take a final look at everything to confirm it’s right. You’re not committed to the home purchase until you’ve signed all the documents.
Once the paperwork is signed, the title company sends your loan package back to the lender. Depending on where you live, the money is either delivered to the escrow company before you sign, or initiated after the lender receives the package. When the escrow company receives the funds, they’ll pay everyone involved and transfer ownership of the home to you.
Closing time tip
Sign as early in the day as possible. Your lender may need some time to review your documents and wire your funds, and they often have a wire cutoff time. You can’t move into a home until it’s recorded in your name, and if you miss the wire cutoff, you could end up with a full moving truck and no place to move. Also, be prepared to wait in line if you’re closing at the end of the month; that’s the most hectic time for most escrow companies.