The Home Closing: What To Expect

“ABC. A, always. B, be. C, closing. ALWAYS BE CLOSING. Always be closing.”

—Blake, in David Mamet’s Glengarry Glen Ross

The hardest parts are over: You’ve found that perfect home in a haystack of listings, negotiated a deal you’re happy with, and secured a mortgage and you’re now in the home stretch of the homebuying process. Just one more critical hurdle lies ahead: the home closing. Also known as “settlement” or “escrow,” this is a day when all involved parties meet to make this transaction official. To make sure you’re fully prepared, here are some key things to expect from the closing process, step by step—plus a handy checklist to keep it all straight. 

Get all contingencies squared away

Most purchase agreements have contingencies—things that buyers (or sellers) must do before this transaction is official, explains Jimmy Branham, a real estate agent at the Keyes Company, in Fort Lauderdale, FL. These are the most common contingencies you may have:

• Financing contingency
• Appraisal contingency
• Home inspection contingency
• Sale of the buyer’s existing home contingency

Clear the title

When you buy a home, you receive a “deed,” which is a document that transfers “title” to the property to you and establishes your legal ownership of the property—something that’s confirmed by then filing or “recording” that deed and ownership change on local, public land records. As part of the closing process, your mortgage lender (and/or you) will likely require a title search of those land records. This is sometimes called “clearing title” and, among other things, its aim is to confirm that your seller has good title to the land right before transferring such title to you. But you’ll still need (and want) to purchase title insurance. This is to protect you in the event of surprise legal claims by third parties that might assert you do not, after all, really have sole ownership of the home you bought. Sometimes distant relatives—or an ex-spouse—may surface with a claim that they actually own the home, and that the seller had no right to sell it to you in the first place. But clearing title will help ensure this doesn’t happen, says Marc Israel, president and chief counsel of MiT National Land Services, a title company in New York City, and title insurance helps protect your interests in the unlikely, but possible, event that it does happen. As the homebuyer, you’re entitled to choose the title company that clears title and issues the title insurance policy. You can get recommendations from your real estate agent, mortgage lender, and friends—just be sure to check out online the license and reputation of each title company you consider.

Get final mortgage approval

Before you can go to the closing table, your home loan must go through the underwriting process. Underwriters are like real estate detectives— it’s their job to make sure you have represented yourself and your finances accurately and truthfully, and that you haven’t made any false or misleading claims on your loan application. The underwriter—employed by your mortgage lender—will check your credit score, review your home appraisal, and ensure your financial portfolio has not changed since you were pre-approved for the loan. Since underwriting typically happens shortly before closing, you don’t want to do anything while you’re under a pending sales contract that’s going to hurt your credit score. That includes buying a car, boat, or any other large purchase that has to be financed.

Review your closing disclosure

If you’re getting a loan, one of the best ways to prepare is to thoroughly review your closing disclosure. This official document outlines your exact mortgage payments, the loan’s terms (e.g., the interest rate and duration), and additional fees you’ll have to pay, called closing costs. You’ll want to compare your closing disclosure to the loan estimate your lender gave you at the outset. If you spot any discrepancies, ask your lender to explain them.

 Do a final walk-through

Most sales contracts allow buyers to do a walk-through of the home within 24 hours before closing. During this stage, you’re making sure the previous owner has vacated (unless you’ve allowed a rent-back arrangement, in which case they can stick around for a period of time before moving). You’re also double-checking that the home is in the condition agreed upon in the contract. If your home inspection revealed problems that the sellers had agreed to fix, you’ll want to make sure those repairs were made.

 Bring the necessary documentation to closing

Make sure you have the following items when you head to the closing table:

• Proof of homeowners insurance
• A copy of your contract with the seller
• Your home inspection reports
• Any paperwork your lender required to approve your loan
• A government-issued photo ID. (Note to newlyweds who just changed their name: The ID needs to match the name that will appear on the property’s title and mortgage.)
• And of course the funds needed to pay any unpaid portion of the home’s purchase price, over and above the earnest money deposit (which you would have paid as part of the sales contract process) and the mortgage loan funds your lender is providing, and also any closing costs for which you will be responsible. You should have had this exact amount specified to you in advance (by your lender, although sometimes by your title company or real estate agent as well) prior to the day of

Once closing day has arrived, here’s what to expect:

A bunch of people

Exactly who will be present at a closing (and where it’s held) depends on the state you live in, but there are certain supporting characters you can usually expect to make an appearance. The cast includes the home seller, the seller’s real estate agent, as well as your own real estate agent, buyer and seller attorneys (although not always, again, depending on locations), a representative from the title company (more on that below), and, occasionally, a representative from the bank or lender that is underwriting your loan.

Signing your name a lot

You’ll be putting your John Hancock on a pile of legal documents (so be prepared for a mild hand cramp if you’re not used to writing in cursive).

A few curveballs

Be prepared for things to go awry at the closing—for example, someone gets stuck in traffic, a document is missing, or a name is misspelled. But don’t stress; simply do what’s in your power to make the day go off without a hitch. For instance, don’t schedule something two hours after the closing is supposed to start, in case your closing runs over.

Plus: Watch out! 5 things never to say at the closing table

By the time homebuyers make it to the closing, it’s smooth sailing, right? Wrong. For homebuyers, the adage “Loose lips sink ships” is pretty darn spot on as a best strategy at settlement. In fact, “There are things that homebuyers could say that could stop the closing entirely,” warns Jennifer Baxter, associate broker at Re/Max Regency in Suwanee, GA. Granted, many states do not have closings where you must show up in person. Still, if you live in an area where that’s still required or customary, you’ll definitely want to do all you can to raise the odds that all goes smoothly. To help, here are five things you should never, ever say at closing.

“I quit my job this morning”

Before a mortgage lender approves your loan, the company’s underwriter will do a final review to verify that your employment status hasn’t changed since you were pre-approved for the mortgage. That usually takes place a couple of days before closing, so if you just quit (or got fired), your lender might be caught by surprise. Surprise is not good. In fact, you might need to sign a document at closing confirming that your employment status has not changed.

“I can’t wait to get all the new furniture we bought”

Before approving the loan, your mortgage lender will also check to make sure your credit score remains unchanged before closing. If your score has changed, the company might raise your loan’s interest rate, says Judy Weiniger, broker associate and CEO at Weiniger Group in Warren, NJ. So what does this have to do with furniture? Using a credit card to buy furniture—or getting a loan to buy a car—could negatively affect your credit score. And, sadly, credit-damaging behavior is a common mistake. A recent TransUnion study found that consumers increase their credit card spending as much as two or three times their previous rate just before they close on a home. The lesson? At closing, it’s best to avoid talking about anything that could have potentially affected your credit score, in case your lender becomes concerned and uses this info against you.

“I can’t believe the appraisal came in $20,000 above the sales price”

A home appraisal, you might recall, is where an appraiser hired by your lender assesses how much the home is worth. This price might be different from what you’re paying for the place. If the appraised value is higher, that means you got a bargain. Congrats! Go ahead and high-five yourself all you want—later; however, don’t share this news with the home seller (or their real estate agent), since it means he clearly didn’t luck out in this transaction, and sold his home for less than what it might really be worth. As the homebuyer, you aren’t required to share with the seller what the home has appraised for. Baxter advises homebuyers to keep that information private. “If you’re getting a great deal, there’s no need to rub it in the seller’s face,” Baxter says.

“I can’t wait to gut the house”

If you’re planning to remodel the property, just don’t mention that in front of the seller (or their real estate agent), says Weiniger. “Many home sellers still have an emotional attachment to their home,” she says. “They don’t want to hear that you’re going to walk in and just start tearing down walls.”

“Could you remove that swing set from the backyard?”

Closing is neither the time nor place to make last-minute requests of the seller. The exception would be if there’s an issue related to home inspection repairs that you found during the final walk-through, in which case you should absolutely speak up, says Weiniger, unless that issue has already been raised and resolved. However, if you have failed to make your offer contingent on anything, it’s almost undoubtedly your responsibility to take care of it—not the seller’s. If all goes well, as it usually does, you will eventually leave your home closing with a stack of documents (which you should save) and, last, but definitely not least, the keys to your new home.