Important points
On average, a home closing takes 30 to 60 days. The closing process includes mortgage approval, title verification, home inspection, and gathering necessary documents. On the final day, you will need to read and sign the documents before the rights are finally transferred to you.
Once the seller accepts your offer on a home, the closing process begins. There are several steps between application and ownership, from submitting your mortgage application and ordering an appraisal to completing the final walk-through and signing the documents.
This Redfin article outlines the 10 steps to closing on a home and what you can expect during the process. Whether you’re buying a home in Durham, North Carolina, or a condo in Long Beach, California, here’s what you need to know when selling your home.
Documents required for house closing
There are four important documents you will encounter during the closing process. Here’s an overview of what you can expect with each feature:
1. Closing Disclosure: Summarizes the final loan terms, interest rate, monthly payments, and a complete breakdown of closing costs. It must be received at least three business days before the deadline, and you must bring this document with you on the deadline.
2. Seller’s Disclosure: Also known as a real estate disclosure, the Seller’s Disclosure outlines undisclosed details about the home that may negatively impact the home’s value. If the disclosure reveals significant problems with the property, you may be able to back out of the deal without losing your earnest money.
3. Title Deed: The title deed confirms who owns the home and indicates whether there are any claims or liens against the home.
4. Loan Application: You will receive a copy of your loan application for your review.
10 steps to building a house
During the closing process, a sales contract is created between you, the buyer, and the home seller. There are several steps you need to take before closing on a home, and knowing what to expect during the process can help you avoid delays. Let’s take a look at them.
1. Deposit earnest money
You’ll need to turn over your earnest money to the title or escrow company a day or two after the seller accepts your offer. It is usually held in an escrow account while the sale of the home is ongoing.
The earnest money deposit is usually 1% to 3% of the home’s sales price and is a deposit you pay to show the seller you are committed to purchasing the home. If you withdraw from the contract for reasons not stated in the contract, you will forfeit your earnest money. The earnest money will be used to cover closing costs, down payment, and other fees at closing.
2. Complete your mortgage application
Once your offer is accepted, you’ll need to apply for a mortgage. If you work with the same financial institution that issued your pre-approval, some of the documents you need for your application will already be in place. Perhaps all you need to do is provide up-to-date financial statements.
If you are going to proceed with the mortgage process with another financial institution, they will be able to tell you what they need. You’ll likely have many of the same documents you provided during the pre-approval process. All of this information will be reviewed by your insurance company to see if you qualify for the loan you are seeking.
Avoid major financial changes during this period. Opening a new credit card, financing a car, or making a large purchase can affect your credit and potentially delay or deny your approval.
3. Conduct a title search and order title insurance
The title is a legal document that shows the ownership history of your home. After the seller accepts your offer, an attorney or title company will examine the home’s title for any issues that could prevent the home from being legally sold. Most importantly, you want to know if anyone other than the owner has title to the home. We will then create a title report containing our findings.
Once you receive your title report, read it immediately. Please check within a few days of receiving it. If there is a title contingency and the title report reveals an issue that cannot be resolved, you can use that contingency to back out of the deal.
If the title search returns “no defects,” the title company or attorney will order a title insurance policy. This protects you from financial loss if a title problem arises after purchasing the home.
4. Schedule a home inspection
Most buyers choose to have a home inspected by a professional before purchasing it. Inspectors look for problems that could be expensive to repair or make your home unsafe, such as structural defects, electrical or plumbing problems, pest infestation, or appliances that don’t work.
The home inspection can also alert you to issues you should be aware of after you purchase the home. Standard tests can cost upwards of $300 to $400, which must be paid upfront.
Work with your agent to schedule an inspection. Depending on the location and condition of your home, additional inspections may be required, including sewer, termite, and roof inspections. You can usually attend these and ask any questions you may have to the inspector.
The inspection report will help you decide whether to request repairs, negotiate credit, or proceed as is. Your real estate agent will be able to guide you on your next steps based on their findings.
5. Pay the appraisal fee
A home appraisal is a professional’s unbiased opinion of a home’s value. This will help you avoid paying too much for your home. Lenders may require a satisfactory appraisal before approving a loan. They want to make sure the value of the loan does not exceed the value of the home. Some financial institutions waive appraisals, which can save you money and time.
If the appraiser determines that the home is worth at least the purchase price (the amount you agreed to pay in the contract), you’re good to go. If the appraisal is too low, meaning it’s not worth what you agreed to pay for the home, you probably have a few options. Your agent will explain your options based on what is written in your contract.
6. Get homeowners insurance
Homeowners insurance protects the value of your home and personal property from fire, theft, and other damages. Most mortgage companies will ask you to show proof of your existing insurance policy at closing. This policy must be activated before closing so that coverage begins the moment you officially own the home.
Your lender can usually walk you through your homeowner’s insurance options. You can also research insurance on your own to find the plan that best suits your needs. If you live in a flood- and fire-prone area, now is the time to purchase a flood or fire insurance plan.
Do I need a home warranty? A home warranty covers the cost of repairing or replacing major home systems and certain appliances. Although not required, it can help offset unexpected repair costs.
7. Complete the loan with your lender
If you’re closing on a home, you’re usually approved near the end of the closing process, as loan approval can take a month or more. This is the last major part you need to prepare to complete the closing on time. It is important to ensure that there are no major changes to your financial situation while your loan is approved. Once your loan is approved, you can begin the final steps in closing on your home.
8. Perform the final walkthrough
The final walk-through will confirm that the home is in the condition you agreed to purchase. The walk-through should occur after the seller’s property has been completely moved and several days before closing. If you and the seller agree to a repair, you must confirm that the repair is completed.
Additionally, if you have appliances left in the house, such as a refrigerator or stove, check to see if they are still there. Finally, make sure your home is in the same condition as when you last saw it. You can use the final walkthrough checklist to make sure you haven’t missed anything.
9. Gather the documents needed for house closing
The closing process takes time, so you may be wondering when the closing will actually take place. Closing on a home, the process of transferring money and signing the final contract, typically takes place the day before the closing date set in the contract.
What does that mean to you? You should have funds for your down payment and closing costs one to two days before the official closing date. Be sure to find out in advance whether you need to wire your payment or bring a certified or cashier’s check. You generally cannot pay with a personal check.
In some states, a real estate attorney handles the closing process. Your closing agent or real estate attorney will send you a list of everything you will need for the closing. This often includes:
Government-issued photo ID Closing disclosure information to compare with final documents Copy of homeowner’s insurance policy Copy of contract with seller Home inspection report Anything else required by the bank to approve your loan Cashier’s check for down payment and closing costs (unless you are paying by wire transfer) Checkbook (to cover fees)
10. Sign the documents and get the keys
We’ve moved on to the final step of the closing process: signing the final documents. The closing typically takes place with a title company that has a closing agent and a co-borrower. If necessary, a real estate agent, real estate attorney, or seller may be present. There is also an option to do all of this online called eClosings.
Please take as much time as necessary to read and understand everything before signing. Some closing documents are written in complex language, so contact your attorney or real estate agent if you have any questions. Many homebuyers take time off from work to have enough time to read the documents.
Once all the documents are signed and payments are made, the house is yours. You may be able to receive your keys the same day or the next day.
Frequently asked questions about the closing process
How long does it take to close on a house?
If you have a mortgage, closing on a home typically takes 30 to 60 days. In some cases, this can take up to two weeks to complete, but this will vary.
What is causing the delay in closing?
Missing, inaccurate, or late documentation can delay deadlines. Other common hurdles in the closing process include poor appraisals, credit issues, income and asset verification issues, and more.
What are the closing costs?
Closing costs typically range from 2% to 5% of the home purchase price. It covers various charges such as taxes, insurance, and fees.
What is cash payment?
Cash to closing is the total amount due on the closing date. This includes your down payment, closing costs, upfront fees, and the funds required to set up your escrow account. The earnest money deposit will be applied to these costs, including the seller’s or lender’s credit.
What is an escrow account?
An escrow account is typically opened by a title company or escrow company to hold your earnest money until it is closed. After closing, your lender may set up a separate escrow account to collect funds for property taxes and homeowner’s insurance.
How long does it take to close?
Closing Day will take approximately 2 hours to complete. There are a lot of documents to review and sign, so there’s no need to feel like you need to rush.
