Closing on a house: Your step-by-step guide

You’ve made an offer on your dream home and signed the purchase agreement, but now you’re wondering just how long you’ll have to wait to close. The closing process involves several important steps, from assessing the property to finalizing the loan details.

If you’re getting ready to buy a home, it’s important to understand what to expect throughout the closing process and what you can do to make it go more smoothly. Keep reading to learn what’s ahead as you finalize the steps to getting into that new home.

What is the closing process?

The closing process, also known as settlement, finalizes both the home purchase and the mortgage. It involves legally transferring homeownership from the seller to the buyer and finalizing the mortgage agreement between the lender and borrower.

The closing process, which can take weeks to months, involves many different steps to help get the mortgage and sale in order and ends with being cleared to close by your lender. Ideally, you’ll arrive on the closing day with all of your questions answered, negotiations finalized, and your mortgage approved.

How long does it take to close on a house?

On average, closing on a home takes about 30 – 45 days, starting from when you submit your mortgage application to when you sign the final paperwork. The actual closing day itself typically lasts around an hour or two, assuming everything goes smoothly.

The timeline for closing on a house can vary depending on factors such as your level of preparation, the efficiency of your lender, and the responsiveness of all parties involved.

9 steps to close on your house with a mortgage

While each closing process can come with unique challenges, you can expect it to follow the same basic steps, starting from the time you’ve applied for your mortgage.

1. Get familiar with important documents

It’s important to understand the various documents you’ll encounter throughout the closing process. It can be helpful to have a checklist to keep track of them along the way and coordinate with the different parties involved.

Here are some of the documents you’ll see during the weeks leading up to your closing:

• Closing Disclosure: The Closing Disclosure provides the final details of your mortgage. Your lender is required to provide you with this document at least 3 days before your closing, plenty of time to review it.
• Seller’s Disclosure: A Seller’s Disclosure is where the seller will reveal to buyers any elements of the home that could negatively affect the property value. This document protects both the buyer and the seller as the sale moves forward.
• Title documents: Before you close on your house, a title company will complete a title search to verify the property’s ownership and ensure there are no liens before the home is transferred to you.
• Mortgage application: The mortgage application is where you’ll provide key information about yourself and your finances to the lender. It’s the first document that starts the mortgage process, and your lender will provide you with a copy before you close.
• Promissory note: This document is the written agreement between you and your lender, where you promise to pay a certain amount of money in exchange for the loan. It’s a binding contract that includes the details of your loan.
• Initial escrow disclosure: This disclosure, which is required by federal law, shows the monthly escrow charges that will be included in your mortgage statement each month, including your property taxes and homeowners insurance.

2. Get a title search and title insurance

The title search report will summarize the title company’s findings and indicate a legal description of the property, its ownership history, and any liens or encumbrances that are found.

You’ll also be required to purchase title insurance, which protects the lender in case there are any issues with the property’s ownership.

3. Coordinate inspections and repairs

Before finalizing the sale, it’s crucial to get a home inspection to identify any potential issues with the property. During the inspection, a professional will assess the property’s condition, including its structure, plumbing and electrical systems, and safety issues. The inspection will identify any repairs that may be needed.

In addition to the home inspection, you may also decide to get a pest inspection to identify any pest infestations or a radon inspection to see if there’s any radon gas present.

Once inspections are complete, review the results with your real estate agent and decide if any repairs are needed. If the inspection reveals significant issues, you can negotiate with the seller for repairs or request a credit toward repairs after closing.

If there are significant repairs needed and the seller won’t negotiate, you may decide to walk away from the sale, especially if you have a home inspection contingency.

4. Get the home appraised

Lenders generally require a home appraisal to determine the home’s value and ensure that the property is worth at least the purchase price. The appraisal is how the lender determines the maximum loan amount. If a home appraises for less than the purchase price, you may need to pay the difference in cash or renegotiate with the seller to see if they’ll come down in price.

The professional appraiser uses several key factors to assess the property’s value, including the property’s upgrades, and real estate comps.

5. Purchase a homeowners insurance policy

Most lenders will require you to have a homeowners insurance policy in place for your new home, and you’ll need to provide proof of coverage before or during the closing. Shop around for different plans and coverage options to find one that meets your needs and fits your budget.

The cost of your insurance plan will vary based on factors such as:

• Your claims history
• Your home’s location
• Property features and condition
• Your coverage amounts
• Your policy deductible

Depending on your location, you might also want to purchase specialty policies, such as flood or earthquake coverage.

6. Prepare your finances for closing day

Leading up to the closing day, you’ll need to complete several important financial steps. You’ll need to finalize the loan with the lender, including locking in your mortgage rate and getting your final loan approval.

You’ll also need to prepare your personal finances, including making sure you have sufficient money for your down payment and closing costs (typically 2% – 5% of the loan amount) and deciding how you’ll transfer funds for the closing, such as via a wire transfer or a cashier’s or certified check.

7. Complete the final walk-through

Before you officially close on your home, it’s normal to have a final walk-through, when you’ll have the chance to inspect the home before closing. You can verify the seller has made any agreed-upon repairs and ensure there’s no new damage or issues with the home.

The seller will typically need to have their belongings out of the home by the final walk-through, so you can also confirm they’ve cleared out all of their things and left anything they were supposed to leave behind.

If something doesn’t look right, bring it up with your real estate agent immediately. You may need to negotiate with the seller before moving forward with the closing.

8. Prepare for the closing meeting

On the closing day, you’ll be asked to review and sign various documents, most of which will be provided to you at that time. However, there are several important items you’ll need to bring with you, including a form of identification, a certified or cashier’s check, your Closing Disclosure, and proof of homeowners insurance.

It’s also a good idea to bring a list of key contacts in case any issues arise, including your real estate agent, real estate attorney, or anyone else involved in the process who isn’t attending the closing.

9. Attend the closing meeting

When it comes time to close on your home, you might sign the closing documents either in person or remotely, depending on the type of closing. During the closing, you’ll sign documents like the promissory note, initial escrow disclosure, the deed, and the deed of trust or mortgage.

On the closing day, you’ll pay your cash to close, which is made up of your down payment and closing costs. If all goes well, you’ll get the keys to your home and leave the closing as the official owner of your new house.

How to avoid common roadblocks to closing

While most buyers have a smooth closing process from the loan application to the closing day, there are also plenty of roadblocks that can come up along the way. If you’re preparing to go through the closing process, here are some tips to help you avoid common roadblocks:

• Choose experienced professionals: From your real estate agent to your mortgage lender, your entire closing process will go more smoothly if you choose experienced professionals to help you.
• Get preapproved early: It’s helpful to get preapproved before you even put an offer in on a house. Not only does it give you a leg up when you make an offer, but it also ensures you only shop for homes the bank will approve you for.
• Complete lender requests promptly: Throughout the underwriting process, your lender might reach out to ask for additional information or documents. The more quickly you respond, the faster you can move onto the closing.
• Avoid making big financial changes: Lenders want to see stability in buyers. Big changes like leaving a job, applying for a new line of credit, or defaulting on a debt could be a red flag for your lender and hold up your loan.

The bottom line: Take steps to prepare for a smoother closing

The time between your mortgage application and the loan closing is critical. During that time, you, the seller, and your lender will all go through steps to ensure the property and the loan are prepared for the big day.

As you’re getting ready to close on your home, it’s important to prepare for the different steps you should expect and take action promptly to address any issues that come up.

If you’re planning to buy a home and haven’t applied for your loan yet, get preapproved for a mortgage from Rocket Mortgage today.

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