Step 1: Know your paperwork
Nobody loves paperwork, but getting a handle on the necessary documents will help set you up for smooth sailing during the closing process. There is certainly a lot to keep track of, but each piece of paperwork is an important part of closing on a house. Here’s what you need to know:
Closing disclosure
Your closing disclosure shows your loan terms, projected monthly payments and all closing costs. You’ll get it at least three business days before closing so you have plenty of time to review it.
Seller’s disclosure
A seller’s disclosure is like a heads-up to keep you informed and prepared. It’s where the seller notes any known issues with the property, such as water damage or repair history.
Title documents
These confirm that the seller has the legal right to sell the property. In other words, it ensures that you’re buying from the rightful owner.
Loan application
This is your formal request for funding. You can help avoid any hiccups by making sure your financial details are accurate and up to date.
Step 2: Choosing homeowners insurance
When you’re closing on a home, getting homeowners insurance is an important step. It isn’t just a safety net—it’s peace of mind. Your policy will help to protect you financially in the case of a covered loss.
Step 3: Getting your finances ready for closing day
Closing on a house is a big deal, but knowing what to expect can make the process less stressful. It’s important to stay on top of your budget and know what you’ll be asked to pay as you get closer to your new home.
What are closing costs?
House closing costs are what you’ll pay to your lender and other key players who help get your loan across the finish line. They are typically 2% to 6% of what you’re paying for your home. We’ll help you get acquainted with some of the most common closing fees.
| CLOSING COSTS CHECKLIST | ||
|---|---|---|
| Application fee | This fee covers the cost for the lender to process your application for a new loan. | |
| Loan origination fee | This fee is charged by the lender to cover the costs of making the loan. | |
| Credit report fee | This fee covers the cost of checking your credit score and history. | |
| Appraisal fee | This fee is paid to the appraisal company to confirm the fair market value of the home. | |
| Title search and title insurance fee | This fee covers the cost of a title search to ensure there are no liens against the property. It also provides insurance that protects the lender, and possibly the buyer, against any title issues. | |
| Survey fee | This fee is paid to a survey company to verify property lines and details such as shared fences or roads on the property. | |
| Attorney fee | This fee is paid to an attorney for reviewing the closing documents on behalf of the buyer or lender. | |
| Escrow deposit | This is often required by the lender to cover future costs for items like property taxes and homeowners insurance. | |
| Underwriting fee | This underwriting fee is charged by the lender to review the loan application and supporting documentation to make a decision on whether to approve the loan. | |
| Loan discount points | These are optional fees paid to the lender at closing in exchange for a reduced interest rate. | |
| Prepaid interest | This is the interest that accrues on the mortgage from the date of settlement to the beginning of the first monthly payment. |
Other costs & considerations
Outside of closing costs there are a few other terms you may hear as you enter the final stages of your home buying journey.
Cash to close
While closing costs and cash to close may sound similar, they're slightly different. Think of closing costs as just one part of your cash to close. This is the money you’ll need for the remaining portion of your down payment and any remaining closing costs.
Earnest money
Earnest money is your way of showing the seller you’re serious about buying. It is a good-faith deposit that’s usually a percentage of the home’s price.
Lender credits
Lender credits can help you tackle some of your closing costs in exchange for a slightly higher interest rate.
Seller concessions
Now and then, a seller may chip in to help cover costs during the closing process. Seller concessions can help seal the deal on the sale and lower some of the upfront costs of buying a home.
Step 4: What to bring on closing day
It’s finally here! So, how do you get prepared? It’s all about the details. Here’s a quick list of what you’ll want to have on hand—besides your favorite pen, of course:
- A government-issued photo ID
A valid driver’s license, ID card or passport all count. - Cash to close
If you haven’t arranged a wire transfer, bring a certified check or cashier’s check to pay your closing costs. Remember, a personal check will not work. - Closing disclosure
You’ll want to have your closing disclosure on hand as you review your documents.
Pro Tip
Don’t forget to arrive on time, read everything carefully and ask questions. The more prepared you are, the smoother your closing will go.
How long does it take to close on a house?
The short answer? It depends. The closing process usually takes about 30 to 60 days from the moment you sign your contract, but it can depend on things like the type of loan you have and your home inspection. The waiting game can be stressful, but try not to sweat it—your dream home is within reach.
How to avoid common pitfalls
It’s normal to have a few bumps in the road during the closing on a home process, but being aware of common problems is a good way to avoid them.
Get back to your lender quickly
You’ve got a lot going on, but responding to your lender quickly is key. You can keep things moving by having your financial documents ready to go and asking what you’ll need ahead of time.
Put a pause on big purchases
Thinking of buying a car or opening a new credit card? Stability is your best friend right now, so hold off on major moves that could negatively affect your finances.
Watch out for mortgage scams
One big thing to look out for is wire fraud, a scam where hackers try to get you to send closing costs to fraudulent accounts. Keep a close eye on your instructions and always call your lender or title company before starting your transfer. If something sounds too good to be true, it probably is.
