If you’re about to close on a house, congratulations! It wasn’t easy to land a deal on your dream home in this hot market. You’ve probably had to scratch and claw your way to secure an offer.
After sifting through home listings, ensuring your offer was competitive, and jumping through financing hoops, your offer was finally accepted on a house that’s just right for your family.
But the keys aren’t yours yet—so stay on your toes! Be your family’s home-buying hero by knowing exactly what to expect when closing on a house.
1. What Is Closing and When Does It Happen?
Closing is the final step before that house is finally freakin’ yours! Your closing date is the day you become the legal owner of your new home.
During the contract negotiation phase, you (the buyer) and the seller set a closing date, which must be listed on the purchase agreement contract. After the seller accepts your offer and earnest money—money given to secure the contract—you’ll likely wait a while before your actual closing date.
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Even though you and the seller may agree on a closing date, your agents will probably work with your lender and title agency to suggest a timeline that allows them enough time to correctly execute their end of the deal. That could push your closing date out several weeks or even months after your offer is formally accepted.
2. How to Prepare for Closing on a House
Does that mean you can sit back and let everyone else handle the details until then? No way! Take a deep breath. You still have some serious ground to cover before closing on a house. Here’s what you need to do:
Gather Your Team
When you’re this close to owning a home, you don’t want to do something dumb to mess it all up. So make sure you have a solid team on your side, starting with an experienced real estate agent if you don’t already have one. You definitely need an expert who knows your local market because, let’s be honest, no one likes unpleasant surprises.
An agent can also help you network with other valuable team members you may need such as a(n):
- Escrow officer
- Mortgage professional
- Home inspector
- Title insurance agent
Create a Checklist of What Needs to Happen Leading Up to Closing
After you gather your team of experts, they can help you review your contract and prepare for closing contingencies. Closing contingencies are conditions listed in the contract that must be met before the home transaction becomes legally binding. Contingencies may include:
- Home inspection: To protect yourself from a bad deal, hire a home inspector to make sure there aren’t any hidden faults that could cost you big bucks after your seller is long gone.
- Appraisal: This is required by your mortgage lender to keep them from loaning you more money than the house is worth. You or your real estate agent can arrange for a professional appraiser to estimate the property’s current market value. The appraisal fee will be included in your closing costs.
- Loan documents: Even if you were preapproved for a loan, you still have a few more hoops to jump through to get final approval on your financing. Prepare yourself by organizing all your documentation: identification, income statements (pay stubs, W-2 forms), asset statements (bank accounts, investments), insurance information, and a copy of the contract. You’ll also need—if applicable—a divorce decree (child support, alimony information) and bankruptcy papers. For a detailed checklist or financing information, connect with a mortgage lender.
- Homeowner’s insurance: Homeowner’s insurance is a must because it covers the cost to repair, rebuild or replace your new home or items in your home if they’re damaged or destroyed. Typical policies also protect you with liability coverage against accidents in or on your new property. Homeowner’s insurance is often required by a lender and is usually included in your monthly mortgage payment. So make sure you find a good insurance agent who can help you get the best coverage for the lowest cost.
- Final walkthrough: Not to be confused with a home inspection, the final walkthrough—which your real estate agent will schedule—typically happens 24 hours before closing. At this point, all the seller’s belongings should be completely cleared out, except for anything you agreed to keep. Bring your contract to make sure the condition of the home matches the original agreed-upon state. After all, that’s what a walkthrough is all about. Test major appliances, light fixtures, toilets, windows, doors—and basically anything you can think to test. Take your time and bring any unwelcome surprises to your real estate agent’s attention immediately.
If any of these real estate terms are a little fuzzy, talk to your agent. Don’t sign or pay for anything you don’t understand.
3. How Long Does It Take to Close on a House?
The average process for closing can take anywhere from 40–60 days depending on the month and season.1
Why does the home closing process take so long? Well, it’s not unusual for home transactions to encounter some type of delay or hang-up before closing. And a common delay is caused by buyers borrowing more money before their closing date, which complicates their credit.
But if you followed what we teach at Ramsey before you considered buying a home, then you’re already completely out of debt with 3–6 months of expenses in your emergency fund.
There’s no reason to stack extra debt on top of your mortgage. Not only is that dumb, but that decision will also send your mortgage approval straight back to the drawing board. Borrowing more money changes your credit score, which means your lender will have to stick their noses in their calculators to adjust your mortgage agreement. Ugh.
Another reason closing could be delayed is if you aren’t up-front with your lender about all your payment obligations (like child support). This could change your debt-to-income ratio—which means more recalculations.
4. Closing Problems That Cause Delays
Buckle up. It’s time to prepare yourself for other potential delays that could hang up your ability to close on a house. These problems could happen any time after your offer—even up to and including the day of your closing.
Appraisers use comparable home sales to calculate a home’s value. In some areas, home prices are rising so fast that those comparable sales haven’t caught up, which means an official appraisal could be lower than expected. You may also end up with a low appraisal if the home you’re buying has features that aren’t typical for the neighborhood.
But more often than not, a low appraisal is a warning sign you may be paying more than the home is worth. No matter the cause, your lender can’t approve a loan amount for more than the appraised value of your home. If you do end up with a low appraisal, you have some options. You can:
- Ask the seller to lower their asking price. (You might even have a contingency in the contract that protects you from buying a home for substantially more than the appraised amount.)
- Challenge the appraisal or request a new one if it contains incorrect information. (Talk with your real estate agent about this.)
- Cancel the contract.
- Meet in the middle with the seller to pay out-of-pocket cash.
If you decide on the last option, proceed with caution. Adding cash to make up for a low appraisal means you’ll likely have to live in the home longer for its value to recover. If you can’t negotiate a better deal with the seller, your safest bet may be to let the home go.
If you made your offer on your new home before you were preapproved for a loan, your bank will now begin digging into your finances to determine how much they’re willing to lend you. This could go really well—or terribly wrong.
Say your offer is on an affordable home and you’ve got a down payment of 10% or more. Let’s also say your mortgage payment will be no more than 25% of your take-home pay (which is what you should always shoot for)—then you’re probably in good shape to get approved. And if you’re getting a 15-year fixed-rate mortgage then you’re in even better shape. You’ll be able to pay off your mortgage in a reasonable amount of time. Any other loan option is a bad idea.
Too many buyers fall in love with homes they can’t afford. And lenders will do their best to "make your homeownership dreams come true," but they’ll do it with rotten financing options like adjustable-rate mortgages or piggyback loans. Even a simple 30-year fixed-rate mortgage is a rip-off that will cost you tens of thousands more in interest and keep you in debt for decades!
Ideally, you need to be preapproved for a mortgage (not just prequalified) before you begin shopping for homes. That way you know your exact price range, and you won’t make offers on homes you can’t afford.
Home Inspection Problems
Nearly every home inspection—even those on new homes—will turn up some issues. Some are minor and can either be ignored or resolved by further negotiating the terms of the purchase contract.
But some issues like insect infestations or water damage are warning signs you can’t ignore. Termites, for example, cause more than $5 billion in property damage each year, and the repair costs aren't usually covered by basic homeowners insurance.2 On top of repairs, you’d also need to pay an exterminator to eliminate the infestation. To give you an idea of how much that can be, chemical extermination for a 2,500-square-foot home costs between $1,800 and $3,100.3
Other major problems like mold, foundation issues, and major electrical or plumbing problems need to be fixed too. These are expensive to repair and indicate potential ongoing problems with the home. As much as you love the home or the location, if the seller isn’t willing to negotiate so that you’re not left to take on those expenses, it’s usually better to walk away than to walk into a home with costly complications.
If the first time you saw your potential home was also the first time you ever visited that neighborhood—buyer beware!
Take steps between now and closing to make sure you’re buying a home in a quality neighborhood. Closing is final and you need to make sure there are no hidden issues. Drive through on different days at various times of day. Do people seem comfortable visiting together outside their homes? Are kids running around? Is there construction nearby?
Go online and research the nearby schools and make sure this is a place you’ll want to stay long term. A great deal on a home isn’t worth it if the neighborhood’s in decline.
Imagine if—during the final walkthrough—you find something that’s been damaged or you notice the seller removed something that was supposed to stay. The process to resolve these issues could delay your closing date.
On closing day, you’ll sign your way through 50–100 pages of paperwork. (Yes, you read that right.) After weeks of waiting, you may be tempted to breeze through all the confusing legal jargon just to be done. But this is no time for a race to the finish. Read each page thoroughly, and don’t be afraid to ask questions if something doesn’t add up. Your real estate agent can help you navigate the rough spots.
5. How Much Does It Cost to Close on a House?
Closing costs are the fees third parties charge when you finalize buying your home. These costs usually include the home inspection bill, premium for homeowner’s insurance, appraisal fee, credit report charges, attorney expenses and so forth. Be mindful that you’ll need to pay some of these fees before the actual closing day (earnest money, home inspection).
On average, buyers usually pay 3–4% of the purchase price of their home in closing fees.4 For example, if your home costs $300,000, you might pay between $9,000 and $12,000 in closing costs.
How to Be Prepared for Closing Costs
At least three business days before closing, your lender must send you a Closing Disclosure. This form lists all final terms of your loan such as closing costs and the details of who pays and receives money at closing.
Review each cost carefully ahead of time and compare it to your original Loan Estimate. This is the form you received soon after you applied that told you the estimated interest rate, monthly payment and total closing costs for your loan. If anything has changed, ask your lender why.
Double-check your monthly mortgage amount to be sure everything was calculated correctly—and that you really can afford it. Your mortgage payment shouldn’t exceed 25% of your monthly take-home pay.
6. What Do I Need to Bring on Closing Day?
To make sure everything runs smoothly, you’ll need to bring a few things to your closing appointment. Luckily, your title company representative and mortgage loan officer usually provide a checklist of everything you’ll need. This list includes:
- Photo ID
- Outstanding documents or paperwork for the title company or mortgage loan officer
- Certified or cashier's check made payable to the title or closing company for closing costs that aren’t being deducted from the sales price
7. What Happens on Closing Day?
If you bring everything you need on closing day, get ready for a John Hancock party! Here’s how closing works:
- You’ll pay any remaining closing costs, as listed in your Closing Disclosure.
- The seller will sign documents to transfer property ownership.
- You will sign a:
- Settlement statement that lists all costs related to the home sale
- Mortgage note stating your promise to repay the loan
- Mortgage or deed of trust securing the mortgage note
After that, the title company will register the new deed in your name. It sounds simple, but be prepared for a ton of paperwork!
8. Where Does Closing Take Place?
For your closing appointment, you’ll likely meet at the office of the escrowee. The escrowee will probably be the title company that legally secures your ownership of the house.
Who Attends the Closing of a House?
Depending on where you live, those at your closing appointment might include you (the buyer), the seller, the escrow/closing agent, the attorney (who might also be the closing agent), a title company representative, the mortgage lender, and the real estate agents. But if the seller pre-signed the deed and transfer documents, they probably won’t need to be there.
9. How Long Does It Take to Move Into a House After Closing?
You might be able to move into your new house as soon as the closing appointment ends—unless the seller asked to stay in the house for a length of time after closing (as with a rent-back agreement). The move-in date should have already been determined and detailed in the contract, so the seller should know way ahead of time how long they have to move out after closing.
Close With Confidence!
Once you’ve knocked out these steps, you’ll be able to move into your new home! Now, we know it’s not as easy as it sounds. If you find yourself wishing you had more clarity around the process or a guide to walk you through it, don’t hesitate to reach out to a professional—like one of our Endorsed Local Providers (ELPs) real estate agents.
ELPs are some of the best agents in your area and must close at least 35 homes per year or more homes than 90% of the other agents in your market to be in our program. That means they’ve probably been through any closing scenario you could imagine! Talk with an ELP today about how they can help you close with confidence.