Closing on a home is the final step in the home buying process. It involves a series of important actions and paperwork that finalize the transfer of ownership from the seller to the buyer.
Here’s a guide to help you understand the closing process and what to expect on closing day:
1. Step-by-Step Guide to the Closing Process
The closing process involves several key steps that ensure all aspects of the sale are completed legally and properly:
Open Escrow: Once your offer is accepted, an escrow account is opened to hold funds and documents until the sale is finalized.
Title Search and Insurance: A title company conducts a search to ensure the property title is clear of any liens or disputes. Title insurance protects both the lender and the buyer from future title issues.
Home Inspection and Repairs: After the inspection, any necessary repairs are negotiated and completed.
Appraisal: The lender orders an appraisal to confirm the property's value matches the loan amount.
Final Loan Approval: The lender reviews all documents and grants final loan approval.
Closing Disclosure: You’ll receive a Closing Disclosure at least three days before closing, detailing all loan terms and closing costs.
2. Key Documents You’ll Encounter
During the closing process, you’ll encounter several important documents:
Closing Disclosure: This document outlines all the terms of your loan, including the interest rate, monthly payments, and closing costs.
Deed of Trust or Mortgage: This document secures the loan with the property as collateral.
Promissory Note: This is your promise to repay the loan according to the terms agreed upon.
Title Insurance Policy: This protects against future claims to the property title.
3. Who Will Be There
On closing day, several parties will be present to finalize the transaction:
Buyer and Seller: Both parties need to sign documents and finalize the sale.
Real Estate Agents: Both the buyer’s and seller’s agents may be present to facilitate the process.
Closing Agent: A closing or escrow agent oversees the signing and ensures all paperwork is in order.
Lender’s Representative: A representative from your mortgage lender may be present to explain loan documents.
4. Final Walk-Through Checklist
Before the closing meeting, you’ll conduct a final walk-through of the property:
Verify Repairs: Ensure any agreed-upon repairs have been completed.
Check Condition: Confirm that the property is in the same condition as when you made your offer.
Test Systems: Test all appliances, HVAC systems, and fixtures to ensure they are in working order.
5. Reviewing and Signing Documents
At the closing meeting, you’ll review and sign all necessary documents:
Verify Information: Double-check all personal and loan information for accuracy.
Ask Questions: Don’t hesitate to ask questions about any document or term you don’t understand.
Sign Documents: Sign all required documents, including the Closing Disclosure, Deed of Trust, and Promissory Note.
6. Closing Costs and Fees
Be prepared to pay various closing costs and fees:
Loan Fees: These include origination fees, application fees, and any points you’ve agreed to pay.
Title Fees: These cover the title search and title insurance.
Escrow Fees: These are fees for the escrow services provided.
Prepaid Costs: These can include property taxes, homeowners insurance, and interest.
7. Receiving the Keys
Once all documents are signed and funds are transferred, you’ll receive the keys to your new home:
Transfer of Ownership: The property’s title is officially transferred to your name.
Celebrate: Congratulations! You are now a homeowner. Ensure you have all necessary keys, garage openers, and any access codes.
Conclusion
Understanding the closing process and what to expect on closing day can help ensure a smooth and stress-free experience. By being prepared and knowing what steps are involved, you can confidently navigate this final stage of your home buying journey. Utilize Homa’s resources to guide you through each step, ensuring you have all the information and support you need to successfully close on your new home.