Closing day marks the end of the homebuying process and the start of your new life as a homeowner. In this article, we'll guide you through what happens on this pivotal day and how to ensure a smooth transition to homeownership.
How to Prepare for Closing on a House
Let’s review some key steps all buyers should take to ensure that closing day goes without a hitch:
Step 1: Review Your Closing Disclosure
Your lender is required to provide you with a finalized closing disclosure three business days before your closing day. This document outlines all of your closing costs and loan terms as well as the final amount of money you need to bring to the closing. You should review this document very carefully. Check for accuracy and ensure you understand all of the financial aspects of the transaction.
Step 2: Final Walk-Through
Your purchase contract should stipulate your right to a final walk-through within 24 hours of closing. Your real estate agent may or may not accompany you for this.
Take a close look and make sure that any agreed-upon repairs have been completed, all included appliances and fixtures are present, and that the previous owner has removed all unwanted items.
Alert your real estate agent immediately if you detect any problems.
Step 3: Prepare Your Payment
Your agent and lender will let you know if you need to bring a payment to closing and what form of payment you should bring. Closing agents will usually only take a cashier’s check or a verified wire transfer as suitable forms of payment. If your seller has already agreed to pay closing costs, you may not have to bring any money to close.
All this information should also be present in your closing disclosure.
Closing Documents for Buyers and What They Mean
A clear understanding of closing documents helps ensure that the terms and conditions, interest rates, fees, and obligations align with what was agreed upon during the homebuying process.
Here are some standard documents to be reviewed at closing, along with what they mean.
| Borrower’s Certification & Authorization | A common form for home loans that certifies that the information you’re providing is accurate. This form also authorizes the release of credit, tax, employment, and income records to lenders who may purchase the mortgage on the secondary mortgage market. |
| Closing Disclosure | The Closing Disclosure is a final review of all loan fees and costs and must be made available to buyers at least three business days before closing. |
| Initial Escrow Account Disclosure | This statement estimates how much you’ll contribute to your escrow account during the first year of your mortgage. VA buyers typically escrow money each month to cover their annual property tax and homeowners insurance bills. Your mortgage servicer is responsible for making sure these get paid. |
| IRS Form 4506-T (Request for Transcript of Tax Return) | You’ve likely already signed this form once during the loan preapproval process. But it’s common for lenders to double-check your income and tax information, including individual tax returns, W-2 wage and tax statements, and more. |
| Mortgage Note or Deed of Trust | Depending on where you purchase, you’ll either sign a mortgage note or a deed of trust. These documents basically do the same thing – pledge the property as security for the loan. This allows the lender to take back the property if you stop repaying the loan. |
| Promissory Note | This is basically a legal IOU. The promissory note details the lending agreement between you and the lender, including the loan amount, interest rate and number of years in your mortgage term. |
| VA Form 26-1820 (Report and Certification of Loan Disbursement): | This document helps affirm that the loan meets VA guidelines and regulations and that VA buyers are occupying the property as their primary residence. |
| Warranty Deed | The deed transfers legal title of the property to the new owners. |
What happens on closing day for a buyer?
No two closing days look the same, but there are a few key events that will occur. On closing day, you will sign your final closing documents, hand over your closing costs payment, and, once everything has been finalized, walk away with the keys to your new home.
How long does closing day take?
Give yourself at least two hours to be safe. Some closings may take more time, and some take less.
What should I bring to closing?
You should make sure you bring the following items to your closing day to ensure you have a smooth process:
- Government-issued photo identification: A valid driver's license, passport or military ID is ideal.
- Marriage license: It’s especially important to bring a marriage license if you are co-borrowing and do not have the same last name as your spouse.
- Certified check or cashier's check: This is often required to cover your portion of the closing costs and down payment. Confirm the exact amount with your lender or closing agent in advance.
- Proof of homeowner's insurance: Many lenders require the purchase of homeowners insurance when purchasing a property.
Who comes to the closing of a house?
The following people will likely be present at your closing meeting:
- Closing agent (who may work for the lender or the title company)
- Title company representative
- Homebuyer(s) or a legal representative
- Homeseller(s) or a legal representative
- Real estate agents for the buyer and seller
- Occasionally, an attorney for one or both parties
The closing agent will conduct the meeting and review all the relevant documents. After the documents are reviewed, signatures will be obtained. All parties, including the homebuyer(s) and seller(s), sign the necessary documents, often in the presence of a notary.
Taking Title of the Home
During the loan closing, you’ll finalize the title for the property. There are a number of ways to hold title, and it’s not a throwaway decision. Divorce, death, lawsuits and more can all lead to title-related implications.
Common ways to title a property include:
- Joint tenancy: Two or more people holding title jointly, with equal interest in the property. This is common for spouses and couples. Joint tenancy features a right of survivorship, which basically means the ownership of the home transfers fully to the remaining tenant.
- Tenancy in common: Unlike joint tenancy, one tenant in this setup can own a larger share of the property than others. There’s also no right of survivorship.
- Sole ownership: This is when just one person holds title, even if there are multiple parties involved with the home loan.
If you have questions about how to title your property consult with your loan officer, a financial professional, an attorney, or all of the above well before closing day. Every buyer’s situation is different so some title scenarios may be more beneficial for you than others.
Recording the Deed
Your lawful ownership of the property is enshrined in what’s known as a deed. It’s a legal document that attests to a transfer of homeownership – the home is changing hands from the seller’s to yours.
After your loan closing, a title company employee will usually take your deed to your county’s administrative offices, where it will be formally recorded. The recording fee is typically part of your closing costs.
At this point, your home purchase is a matter of public record. Some of the information associated with the transaction will be accessible to anyone in your community and beyond.
A New Journey
Cheers to your new beginnings!
As you receive the keys to your new home, remember it's not just a house but a blank canvas where lasting memories will find their place. The path to homeownership can be exhausting, but it's important to acknowledge and celebrate the milestone, as it marks the end of one journey and the beginning of another.
To make sure you enjoy your new home to the fullest, here are 5 financial tips for new homeowners.
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