When you are preparing to close on a home, it can feel like you are near the end of the buying process. If you are well prepared, and you have a good attorney and buyer’s agent representing you, everything should go smoothly and the closing should be the end of the homebuying process, and the beginning of life in your new home.
Let’s look at the things you need to be ready for when you close on a house.
What is a Closing?
A real estate closing is when the property will become yours at last. On the day of closing, you will be scheduled to meet with your closing attorney (usually at his/her office) to sign many documents. Most of the documents are required by lenders. After all documents are signed, the attorney will submit required documentation to the registry of deeds of the county that your home resides in. Once the registry officially records your deed, with you as the new owner (this is referred to as “being on record”) ownership will legally switch to you. It will be the final step in taking ownership of the property.
The agreed-upon closing date should have considered the time needed for the lender, title company, and other professionals to do their work to make sure everything is correct and legal. This includes the title search checking the property title for any issues so title insurance can be issued. Having a clear title is a crucial aspect of any home purchase contract.
At the closing, the attorney will have the deposits you paid at the offer and P&S, then you will be instructed to bring the remaining portion of your down payment, if any. Your lender will have sent the mortgage money, and you will have to bring a check to cover the closing costs. Your attorney will contact you a few days prior to closing to instruct you exactly what you need to bring, and how much.
Days Prior to Closing
2-3 days Prior to closing, your attorney, or your lender will contact you to review all of the details of the closing. They will send you a closing disclosure statement that details all of the debits and credits that will be impacting you on closing day. They will also give you a dollar amount that you will be required to bring with you to reconcile the closing. This dollar figure will represent whatever the remaining amount you owe on your down payment (your ultimate down payment amount less any deposits you’ve made), plus any closing costs that you will owe.
A Day or two prior to closing (sometimes the actual morning of the closing) you will do a “final walk-through” of the house. This is usually a 30 minute walk-through designed to ensure that whatever is supposed to be removed from the house, has been removed. Whatever is supposed to remain with the house, is still there. And to ensure that there has been no damage to the house since the time that you made the offer.
In the event that there is an issue, this will usually be resolved at the closing. For example, let’s pretend that at the final walk-through you notice that the sellers decided to take the washer and dryer which were agreed to be included in the sale and documented in the purchase and sale. This will not prevent the house from closing, however, your attorney will negotiate with the sellers attorney a fair amount that the sellers will agree to give you to cover the cost of a new washer and dryer.
The common question is how much are closing costs, and what do they include? Closing costs vary significantly from transaction to transaction.
Typical items that the buyer will have to pay for a closing include:
- a) Lender fees such as mortgage origination fee, points, appraisal fee, credit report fee
- b) Title company & attorney fees, including: closing fee, title search, and title insurance
- c) Seller refunds – it is typical that when the seller has paid a full quarter’s real estate taxes, the buyer will need to refund the seller for any portion of those taxes that they will assume once they purchase the house. For example, if taxes for the first quarter are $1,500 and the closing on the house happens at the end of the first month of that quarter, then the buyer will need to reimburse the seller for the remaining two months, or $1000 in this example. Also, if the seller has paid fuel costs in advance, for example if they filled the oil tank, or the propane tank, the buyer needs to reimburse the seller for any unused portion of fuel they will benefit from
- d) Recording & Administrative fees – there are usually fees associated with recording the deed, occasionally there are fees associated with having to send documents overnight. Any of these expenses that benefit the buyer will be part of the buyers closing costs.
- e) Insurance – if the lender requires that the buyer purchase homeowner’s insurance, that often is paid for in advance at the closing.
Those are the typical closing costs that buyers incur in a normal transaction. Although there is no single standard amount, typically closing cost will be 1.5% to 2.5% of the purchase price.
The Closing Meeting
Your real estate team (agent, lender, title company, attorney) has been working behind the scenes for many weeks to prepare for the closing. A closing typically takes around 2 hours.
We will review each document with you, you will have the opportunity to ask questions. Typical items that you will be required to bring to a closing include: two forms of ID for each person who will be on the deed, bank checks to cover the remainder of your down payment and your closing costs, and a blank personal check to cover any small miscellaneous expenses that may need to be reconciled in order to close (typically this would be less than $100). Again, your attorney will call you in advance of the closing to review these figures with you.
Once the closing is done, it usually takes 3-4 hours before you are officially “on record “. Once you are “on record” Your agent, or your attorney, will give you the keys to the house – and then it is yours!