10 Steps for Closing on a House

Buying a home is one of the biggest milestones in life. Whether it’s your first home or your third, taking the right steps when closing on a house are an important part of the process.

From the day you make an offer to when you hold the keys in your hand, every step gets you closer to making your dream home a reality. Here are some important things to know about closing, so you can start the next chapter of your life with confidence. 

 

What Does it Mean When You Close on a House?

Closing on a house is the final step in the homebuying process where ownership officially transfers from the seller to the buyer. On your closing date, all the necessary paperwork is signed, finances are exchanged and the buyer gets the keys to their new home. 

During the closing, you will review and sign many documents, including the title and the mortgage agreement. Once the signing is complete, you’ll receive the deed. The deed is confirmation that the home is now legally yours. 

 

How Long Does It Take to Close on a House?

The time it takes to close on a house can vary, but it typically ranges from 30 to 60 days from the time the offer is accepted.

However, several events can impact the house closing timeline, including:

• Issues during underwriting.
• Inspection or repair issues.
• Appraisal discrepancies.
• Changes in the buyer’s financial situation.
• Title issues.

While 30 to 60 days is common, some closings may be faster or slower depending on how smoothly the process goes.

 

The House Closing Process

The house closing process goes through a series of steps that finalize the transfer of property ownership from the seller to the buyer. While it may seem complicated, each step is there to ensure that the transaction is legally binding and that all parties are protected.

Step 1: Determine If You Need a Lawyer

While some states require a real estate lawyer to be present during the closing process, other states, like California, do not.

During the closing process, a lawyer can help:

• Ensure all documents are correctly prepared and filed.
• Conduct title searches.
• Handle negotiations on your behalf.
• Review contracts and agreements.
• Clarify any unclear language.
• Communicate your needs effectively.
• Protect your assets and investments.
• Ensure compliance with all legal requirements.

In states where an attorney's help is not required by law, your real estate agent should be prepared to help guide you through the process.

Step 2: Review all Documentation

Before closing, it’s important to carefully review all of the documentation involved in the transaction.

Documents to pay careful attention to include:

• Your purchase agreement
• Contingency waivers
• Inspection results
• Escrow documents
• Loan paperwork
• Closing Disclosures

Take the time to read through each document and don't hesitate to ask questions if something is unclear. This will help avoid any misunderstandings and ensure that you fully understand the terms of your purchase before you sign.  

Step 3: Run a Title Search & Obtain Homeowners Insurance

A title search is typically required by your lender to confirm that a property for sale has a clear title and has no legal claims, liens or disputes filed against it. Your lender will likely hire a title company to do the search, which is needed in order to obtain title insurance.  

In addition to a title search, you'll need to purchase homeowners insurance before most lenders will proceed with closing on your new home. The cost of your homeowners insurance plan will depend on different factors, such as the age and condition of the home, the specific coverage you choose and the deductible amount you are comfortable paying. 

Step 4: Complete a Home Inspection

A home inspection is an important part of the closing process. It allows you as the buyer to assess the condition of the property before your move-in date. By hiring a licensed home inspector to do the job, you will get a detailed report on any potential issues, from minor repairs to major structural concerns. If any issues are found, you can ask the seller to make repairs, offer a credit or even reconsider the purchase. 

During a home inspection, the inspector will take a close look at several things, such as: 

• Foundation and structural integrity. 
• Roof condition and potential leaks.
• Plumbing systems, including pipes and water heaters.
• Electrical systems and wiring.
• Heating, ventilation and air conditioning (HVAC) systems.

While inspections are generally not required by law, they are usually required by your lender and strongly recommended to avoid any unexpected costs after you move in. Your home inspection report might also help you decide whether to call in specialists for additional, more specialized inspections.

For example, if a home inspector notes that a home's air conditioning unit is older, you may want to have an HVAC specialist come to the house for a more in-depth opinion and quote on eventually replacing the system.

Step 5: Negotiate Closing Costs

Closing costs are the fees and expenses you will pay to finalize the purchase of your home. These can include things like loan fees, title insurance, appraisal costs and commissions.  

It’s important to note that a recent settlement by the National Association of Realtors has changed the way commissions are handled. In the past, commission rates were standard and predetermined; however, buyers and sellers are now directly involved in deciding how much will be paid and who will cover these costs. 

Under the new rules, commission details are no longer visible on the Multiple Listing Service (MLS), so buyers and sellers will need to negotiate those fees. Buyers will have to decide how much they’re willing to pay their agent, while sellers may offer to cover part or all of the buyer’s agent’s commission. 

Step 6: Open an Escrow Account

An escrow account is a secure, third-party account that holds funds and important documents during the homebuying process. It ensures that both the buyer and seller meet their obligations. This account will often hold your down payment, closing costs and other fees involved in the sale. 

Escrow accounts are not required in all states, so be certain to look at your local laws and ask your agent about whether you'll have one during your closing process.

Once everything is in order and all the paperwork is signed, the funds are then released to the appropriate parties. Having an escrow account helps protect both the buyer and the seller, as it helps to ensure that everything goes smoothly and according to the agreement. 

Step 7: Prepare Your Finances for Closing Day

As you get closer to closing day, it’s important to have your finances in order. Your Closing Disclosure will outline exactly what you’ll need to pay when the time comes.

Here are some of the costs you might need to cover:

• Closing Costs: Fees such as appraisal fees, title insurance and attorney fees.
• Earnest Money: The deposit you put down to show the seller you’re serious about buying the home. 
• Cash to Close: The total amount of money you will need to bring to closing, including your down payment and closing costs, such as escrow fees and agent fees.

There are two common ways that you can reduce the amount of money that you pay on closing day. First, you might be able to secure lender credits, or money your lender pays to help you with closing costs. Lender credits aren't free and are a function of the loan's interest rate. To receive a credit, a borrower usually pays a slightly higher rate over the life of the loan and the lender rebates part of those future payments back to the borrower as a credit at closing.

You also might be able to negotiate seller concessions during the closing process. This means that the seller covers some closing costs on behalf of a buyer, often because of discoveries during the home inspection.

For example, if a home inspection reveals a termite problem with a home, a seller might agree to pay an amount of closing costs that are equal to what the termite treatment will cost the buyer.

Step 8: The Closing Date

Know your closing date so you can plan your moving schedule, the seller’s availability and any deadlines for your mortgage or loan terms.

If things are going smoothly and you can pick a closing date, try to do so. It’s also helpful to leave a little buffer time in case any unexpected delays arise, like issues with inspections, appraisals or paperwork. Work with your lender, real estate agent and seller to find a date that works for everyone. 

Step 9: Renegotiate if Needed

Sometimes, the unexpected occurs during the homebuying process that may require you to renegotiate the terms of the sale. Whether it’s something found during the home inspection, a change in the appraisal value or issues with financing, you may need to revisit the agreement.

If repairs are needed or the home’s appraised value comes in lower than expected, you may be able to negotiate with the seller to adjust the price, request repairs or ask for credits toward closing costs. 

Step 10: Do a Final Walkthrough

A final walkthrough is your last chance to make sure the home is in the condition agreed upon before closing. This is usually done just a few days before the closing date and allows you to confirm that any repairs have been completed, the home is in good shape and there are no new issues since your last visit. 

During the walkthrough, check that all appliances and systems are working properly and that the property is clean and ready for move-in. If you find any problems, you can bring them up to the seller before signing the final paperwork. 

 

What to Bring on Closing Day

On closing day, you will need to bring a few important items.

Here’s what you should have with you on your closing day:

• A valid form of photo identification, such as a driver’s license, passport or government-issued ID. 
• A certified or cashier’s check for the total amount of closing costs, or proof of a wire transfer. 
• Your Closing Disclosure, to compare with the final paperwork. 
• Proof of homeowners insurance to show the lender. 
• Contact information for your real estate agent, in case they can’t be there in person. 

 

What Happens on Closing Day?

Closing day is when the home officially becomes yours. During the closing, you will review and sign the necessary paperwork. This includes loan documents and the property title. You will also pay any remaining closing costs and provide proof of homeowners insurance if required. 

Once everything is signed and payments are made, the lender will release the funds to the seller, and you will receive the keys to your new home! In states that require escrow, you might have to wait a few days or weeks until you receive the keys to your new home.

It’s a big moment and the final step in the homebuying process, so make sure you take your time reviewing the documents and asking any questions if needed. 

Now it's time to start life as a homeowner! One of the first parts of this should involving make a smart budget to account for the costs of homeownership. Get some takeaways for budgeting as a homeowner here.