What Happens on Closing Day
You made an offer on a home and it was accepted. What’s next? As you prepare to become a homeowner, here’s a step-by-step guide to what happens on closing day.
What is a closing on a home?
Closing refers to the actual purchase of real estate. It’s not like checking out at a store, and the process is more complicated than finalizing a car loan. There are individual steps to be completed when closing on a home. A large amount of documentation must be prepared and reviewed. When everything is ready, you sit down with the people involved and sign everything required to become a homeowner.
How to prepare for closing day
Closing on a home is a big step, but don’t let this truth overwhelm you! If you follow these steps, you’ll be ready for what happens on closing day and avoid any delays.
Get a home inspection.
A home inspection is conducted by a qualified third-party, and often done when an offer is accepted. Your offer should be contingent on the outcome of the home inspection. Who knows what’s lurking behind those walls?
The inspector examines and assesses your home’s structure (from foundation to roof) and systems, such as plumbing, electrical, and HVAC (heating, ventilation, and air conditioning).
A thorough home inspection should take a few hours to complete. The inspector will provide you with a complete report, including recommendations of repairs to be completed prior to closing. You have the option of asking the seller to complete the repairs prior to closing (and provide proof they were done) or to reduce the selling price to reflect the cost for you to do the repairs yourself. A seller who is eager to close might prefer to reduce the price.
Your Realtor can provide recommendations to find a reliable home inspector.
Review and examine closing costs.
Closing costs include a variety of fees; some of them are fixed—like property taxes—while others can be negotiated. You should plan to shop around for the best mortgage interest rate by checking with different lenders. While you’re speaking with these home finance professionals, ask them what they charge for the home appraisal and loan origination, too.
You also have flexibility with the cost of a title search. Contact several title companies to get their fee schedule.
Confirm the appraisal is scheduled.
A home appraisal is not the same as the home inspection. The appraisal is an estimate of a home’s market value, as determined by a certified appraiser. Your lender hires and schedules the appraisal. The purpose is to ensure that the home is worth at least as much as the purchase price, because you will only be approved for a loan amount that does not exceed the home’s appraised value, minus your down payment.
Many offers are contingent on the outcome of the appraisal. If the home you want isn’t valued at the selling price, you have the options to renegotiate the price, walk away from the offer, or pay the difference between the appraised value and the loan amount.
Talk to your title company agent.
In real estate, a title represents the legal right to ownership of a property, which is transferred from one owner to the next by a deed to that property. A title search is a vital step in the closing process, because it will uncover any claims against the property. For example, there may be unpaid taxes or someone else’s name on the deed. In those instances, you can’t close on the property until those issues are resolved and the property is considered free and clear.
To protect you, a title company conducts a title search and a property survey, which ensures your lot’s boundaries are accurate. You’ll need to know if there are easements or other claims to a portion of the land you plan to purchase.
You’ll also need title insurance, a policy that protects you from legal issues that result from an ownership dispute. The title company obtains the title insurance for you, which you pay for at closing.
Finally, the title company sets up your escrow account. Escrow holds your funds that will be exchanged at closing, like the down payment. Your Realtor or lender can provide you with recommendations for title companies to contact. Plan to shop around so you can compare fees.
Confirm the closing date.
The next step is to confirm the date for your closing day. On average, in 2024, expect about 43 days between the acceptance of your offer and the closing on a home. Some loans, such as a cash sale, can close more quickly.
Your closing can be delayed if there is a problem with the appraisal, loan, or title search. Some buyers might be required to provide more documentation during the loan underwriting process—often to explain financial issues and sources of income.
The week before closing
You’re closing in on your closing! During the last few days before your closing date, you’ll spend time finalizing the details to ensure a smooth transaction.
Review the closing documents in advance.
Three days before your scheduled closing date, you’ll receive closing disclosure, also known as a HUD-1 settlement statement. By law, your lender is required to send this document to you at least 3 business days in advance of your scheduled closing date.
The closing disclosure details your loan’s terms:
- The type of mortgage (e.g., fixed rate, adjustable rate)
- The loan term (e.g., 30 years)
- The loan amount (the amount you’re borrowing)
- The total you will pay over the life of the loan, including interest
- Monthly mortgage payment
- Escrow details
- Itemized list of closing costs
- The funds you need to bring to closing
Review the settlement statement carefully! Make sure that every item listed here matches with the estimate you previously received. Talk to your lender if you find any errors or discrepancies so that you ensure that what happens on closing day doesn’t include a delay.
Prepare your payments for closing.
The closing disclosure alerts you to the funds you need to bring to closing on a home. You can bring a cashier’s check or prepare to wire the money. Personal checks are not accepted at closing.
What happens on closing day?
Closing day is finally here. You should be prepared to spend 2 to 3 hours as you review the documents and sign them. You have probably already looked through these documents, and your lawyer certainly has.
Who attends closing?
In addition to your lawyer and you, here are the people you can expect to attend the closing:
- Your Realtor
- The seller
- The seller’s real estate agent
- Lender
- Title company agent
The seller and their agent might not be at the closing. The seller’s closing is a separate action, so they might have already signed the paperwork.
What do I need to bring?
In addition to the funds outlined in the settlement statement, bring a photo ID. Newlyweds should have their marriage certificate. Also, note that the name on the loan must match your identification.
You should also be prepared to show proof of homeowner’s insurance, with a document provided to you by the insurer.
Sign away!
It’s time to work your way through a pile of closing documents:
- Mortgage promissory note: Your agreement to repay the loan according to the terms.
- Deed of trust: The legal right for the lender to repossess the home if you fail to repay the loan.
- Deed: The document that gives you the legal right to the property you’re purchasing.
- Closing disclosure: The settlement statement you’ve reviewed within the past 3 days.
- Escrow disclosure statement: A list of the fees you pay into your escrow account, such as property taxes, homeowner’s insurance, and possibly a homeowner’s association (HOA) fee.
- Transfer of tax: Applicable in some states, this document acknowledges the sales price and property tax of the home you’re buying.
- Title documents: These ensure that you can lawfully take ownership of the property, that there are no outstanding claims or liens against it.
- Certificate of occupancy: New construction homes must be certified to be occupied before you can move in.
Once all is signed, congratulations, take the keys. You’re a homeowner!
Closing in on your home near Owensboro
From finding your perfect home to buying, closing, and loving it, Thompson Homes is ready to guide you step-by-step through the process. We build communities and single-family homes for sale near Owensboro, KY—You can choose one of our quick move-in homes or let us build one for you from one of our floor plans, giving you options from 1,400 to more than 3,000 square feet.
Every home we build showcases Thompson Homes’ “Dare to Compare” approach to design and construction. We include features that other builders either charge extra to add or haven’t even thought of yet.
Whatever style and lifestyle you’re seeking among new homes for sale near Owensboro, KY let us help you find the right location and home. Browse through our communities, available homes, and floor plans. Check out the useful information for homebuyers on our blog—like choosing a home, understanding financing options, the benefits of new construction, and getting to know the area.
Then contact Thompson Homes Inc. to schedule a personal tour of our communities, furnished models, and new homes for sale near Owensboro, KY.
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