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You saved your pennies, found your dream home, put in an offer, and the sellers accepted. You’re almost at the finish line of your homebuying journey, but before you get the keys and move in, you have to get through closing.
The house closing process is just that: a process with many moving parts and steps to complete before the seller relinquishes ownership and you become the official owner of your new home. It can take almost two months to close or longer if unexpected issues derail the process.
You can take control of your closing process by understanding how it works. Below is everything you need to know about your house closing timeline.
Step 1: Enter escrow
When searching for your home, you may have seen listings that were “in escrow.” Now the time has come for you to enter escrow, but what does this mean?
During escrow, a third-party service will act as a neutral participant to keep track of the buyer’s finances and documents needed to complete the sale. They will collect and hold the buyer’s earnest money in exchange for the seller taking their home off the market. At that time, both the buyer and seller have stakes — the deposit and house, respectively — in escrow until the transaction is completed. This ensures that both parties are incentivized to cooperate without a conflict of interests.
Step 2: Complete loan processing
This final step of your lender reviewing and approving your application is also known as underwriting. Your underwriter will:
- Review your purchase agreement
- Confirm proof of earnest money deposit
- Verify your updated income, assets, debts, credit history
- Order and review your home appraisal (more on this in step 3 detailed below)
If your lender has any questions, the underwriter will reach out to you with questions.
Step 3: Get a home appraisal
As a part of the underwriting process, your lender will order a home appraisal. A home appraisal is an unbiased estimate of the property’s fair market value completed by a certified or licensed appraiser. It’s an important part of your loan processing because most lenders won’t approve a mortgage worth more than your home's appraised value.
It typically takes ten days to receive your appraisal report. If your appraisal comes in low, don’t fret. You may still be able to appeal your low appraisal, or if you have an appraisal contingency, you may be able to walk away or renegotiate the sale price.
Step 4: Order a home inspection
A home inspection protects buyers from purchasing a home that needs both substantial and superficial repairs without being adequately informed. If you didn’t waive your inspection contingency when making your offer, you would benefit from a professionally trained and certified building inspector’s report on the condition of your home. If the inspector uncovers major issues, you may be able to negotiate with the seller to have them cover the costs as part of seller concessions.
Consider requesting a pool inspection if you're buying a house with a pool. This will help ensure that your pool is in good working condition, and the small fee could save you thousands of dollars in costly repairs down the road.
Additionally, your lender may require, or you may opt for, a pest inspection. This specialized inspection provides a detailed report of the pest activity (if there is any) in your home and recommendations for pest management. It can be a particularly important step in areas where homes are vulnerable to termites or other unwelcome guests.
Step 5: Complete a title search and purchase insurance
At this point of the house closing process, you or your agent will order a title search — a review of public records to ensure there aren’t any claims or liens on your property. This is a vital step to ensure that you can become the legal property owner once your home sale is final.
If the title is defective, or has a cloud, meaning that there are claims or judgments against the property, you will have to work with a real estate attorney to resolve the issue. Otherwise, your ownership of the property may be challenged.
Once you confirm that the property’s title is clean, you’re free to move forward and purchase title insurance. This policy protects you from financial loss if the title to your property is contested. Some reasons a title might be contested:
- Ownership by another party
- Forgery or fraud on documents
- Survey errors and boundary disputes
- Code violations by a previous owner
Lastly, you’ll need to purchase a home insurance policy. Lenders often require you to get homeowners insurance before officially closing on your home. It’s different from title insurance, which protects you from past issues on your property; a homeowners insurance policy helps cover you in the event of future damage to your property.
Step 6: Release contingencies
If you didn’t waive contingencies as part of your offer, you’d need to release them as a part of your house closing process. Check with your real estate agent to see if you need to actively approve the contingencies (release them in writing) or if you can passively approve them (release them by not protesting by a predetermined deadline).
Some of the contingencies you may have to release are:
- Financing contingency: If you were concerned that you would not be able to obtain financing for your home purchase, you may have a financing contingency that specifies you could drop out of a home sale if you didn’t obtain a mortgage.
- Home sale contingency: Similar to a financing contingency, if you needed to sell your home to purchase your new home, you may have had a home sale contingency that allowed you to walk away if your house didn’t sell.
- Appraisal contingency: If the appraised value of your home didn’t come in as planned, you may have had an appraisal contingency that would have allowed you to renegotiate or cancel your contract.
- Inspection contingency: Similarly, you may have had an inspection contingency that protected you if an inspector uncovered hidden damage.
- Title contingency: Lastly, you may have had a contingency that released you from your home purchase if there were any issues with your title search.
Step 7: Conduct a final walkthrough
A final walkthrough of your home is one of the last formalities you will need to complete before signing the closing paperwork. This is an exciting moment to reflect on the journey to get here and start envisioning your future in your home. But it’s also a necessary step to verify that everything is in good working order before you become responsible for it.
As you complete your walkthrough, look for the following:
- Verify the sellers have made the requested repairs
- Confirm the sellers have removed their belongings
- Check windows and doors to ensure they lock
- Run appliances to confirm that they work
- Test all of the lights and outlets
- Double-check for signs of mold, pests, or structural failures that happened after the inspection
Step 8: Closing day
You’ve made it to the finish line, but to officially cross it, there’s one final step: Attend your closing day.
Here, you’ll sign all of your final paperwork, which typically includes:
- Promissory note: When you sign this document, you agree to repay the total amount of your mortgage.
- Mortgage note: This note details your mortgage's full rates and terms.
- Escrow disclosure: This is a review and recount of the amounts paid into escrow and the amounts that will be disbursed after closing.
- Deed of trust: When you sign this document, you agree to allow your lender to foreclose on your property in the event that you stop making payments.
You’ll also pay for your portion of the closing costs. These costs can vary state to state or even sale to sale, but they may include:
- Application fee for loan processing
- Loan origination fee
- Home insurance fees
- Home inspection fees
- Title insurance fees
- Property taxes
The meeting will end with a transfer of the home title to your name. Once this is complete, you’re officially the legal property owner of your new home.