Closing: How Does It Work?

Closings take place when you buy or refinance a home. You will conclude all transaction details at this point. Knowing what to expect is a good idea before you attend an event.

Your application has been accepted, and the closing date has been announced. During your mortgage closing, you meet with various legal representatives to sign your mortgage documents, make any necessary payments, and receive the keys to your new property.

It is likely that the closing will take place at the office of the title company, an attorney, or the lender. You’ll need copies of any paperwork you received or signed throughout the homebuying process, as well as two forms of ID and the payment you will be making. During the closing, the following happens:

• All loan documents must be reviewed and signed by you. Please make sure you understand all documents. Don’t sign until you settle any discrepancies between your expectations and what you agreed to.
• Insured homeowners should provide insurance documentation and inspection reports (if applicable).
• The down payment (if necessary), closing costs, prepaid interest, taxes, and insurance are covered by a certified or cashier’s check. A wire transfer would also be an option.
• Your lender distributes the funds covering your home loan amount to the closing agent.
• In addition to the monthly mortgage payment, you may also be required to set up an escrow account (or impound account) to cover property taxes and homeowners insurance.

By understanding key homebuying terms and knowing what’s expected of you, you can simplify the process.

What you sign at closing

During closing, there are three main items to review and sign:

A deed of trust or mortgage

As collateral for your loan, this document puts a lien on your property.

The promissory note

A legal agreement that sets out how your payments will be made and where they will be sent.

A Closing Disclosure

You will receive a detailed statement of the final credits and charges based on your contract terms.

What you pay at closing

Along with any down payment or other prepayments related to your home purchase, you’ll likely pay closing costs, which usually total between 3 and 5 percent of the loan amount. You should first get a sense of how much your closing costs will be from the Loan Estimate your lender provides you within three days of submitting your mortgage application. When your loan is approved, and at least three days before closing, you receive a Closing Disclosure, which lists your finalized closing costs. You may pay some fees noted in your Loan Estimate and Closing Disclosure before closing, such as those associated with credit reports. For the rest, ask your closing agent what payment methods are acceptable.

How long does it take to close on a house?

Closing day typically happens four to six weeks after you sign the sales and purchase contract, though it may take longer. The closing process itself may take several hours. Once all the papers are signed, you’ve secured your mortgage and the closing is officially complete, you’ll receive the keys to the property. Be sure to store all of the documents you received during the closing in a safe place.