Prepare for a Closing

A home closing is the date when the sales transaction for the purchase of a home is finally complete. The sales transaction is considered complete when all documents are signed and payments are made. Preparation is the key to a successful closing, and the details of the transaction should be set at least a few days, if not several weeks, before the actual closing date. This means that a title search has been completed, the mortgage lender has made a commitment to finance the purchase, and all other conditions for the purchase have been met. If the rest of the home buying process has been properly conducted, the closing should go smoothly.

Steps

Finalizing the Administrative Aspects of the Closing

1. Finalize your loan. Remember that the closing is the finalization of the home sale transaction, where you will sign the documents and hand over the checks, so the details of the sale of the home should be finalized before the closing date. Arrange to meet with your lender before the closing date to ensure that all necessary paperwork is complete and your loan is finalized.
2. Obtain homeowners insurance. As a condition of a mortgage, almost all lenders will require a home buyer to purchase homeowners insurance. Homeowners insurance will provide you with protection from disasters occurring on, or to your new property. Your homeowners insurance policy should list the buyers as insured, as well as the lender.
   • Once you purchase the policy, you should make sure to have the insurance company send you a proof of insurance document. You will need this documentation at the closing, so make sure you obtain insurance in advance of the closing date.
   • The default timeline in a typical real estate contract for the insurance contingency is five days. If you cancel the deal prior to that deadline you will not lose your earnest money, but if you cancel after then you may lose it. Contact your insurance agent as soon as you complete your loan application and get approved.
3. Conduct a title search and obtain title insurance. A title search is used to determine “clean title” ie. that the seller has a legal right to transfer ownership, and is very important for ensuring that a buyer receives title to property that is free from the ownership rights/claims of others. Some lenders require a home buyer to purchase title insurance in order to obtain a mortgage. A title insurance policy is a relatively simple type of insurance that protects the buyer and the lender in the event there are problems with the title to the home after the sale.
   • The seller usually pays for the title insurance policy for the buyer and the buyer pays for the lender's policy.
   • Usually, the buyer and lender will have separate title insurance policies that are financed by the buyer. Keep in mind that a title insurance policy will not protect against any unrecorded money you owe that has not been made into liens yet, such as the water outstanding and any code enforcement issues. Make sure that you check with local providers and the city or county for any pending actions or issues as well.
   • As with homeowners insurance, you will need proof of your title insurance coverage at the closing, so make sure to obtain it well in advance of the closing date. The title contingency default is also usually five days from the date of issuance or receipt, depending on how the contract was written. All contingencies can be extended to a date other than the default date prior to the offer being written, However, after the offer has been written and accepted, it would take a mutually agreed upon addendum to change or extend the contingencies.

Preparing to Move Into the Property

1. Schedule an appointment to walk through the property one last time. Before you finalize the purchase of your home, you should take one last look at the property within 10 days of closing or as specified in the contingency. By the time you are ready to close, you should have gone through the house several times, and had a home inspection done. The purpose of this final walk through is not to try to find problems with the home (that should have been done long ago), but rather to make sure the seller has held up his or her end of the bargain by making the repairs you have specified in the contract and left behind any appliances they agreed to leave.
   • To make the final walk through appointment, ask your real estate agent to set it up with the seller’s agent. If you notice anything unusual, your real estate agent should notify the seller’s agent immediately to get the issue resolved.
   • During this time, you may also negotiate for repairs, credit to do repairs yourself, or other terms.
   • Also, keep in mind that issues can be resolved after closing on the house if you are closing soon and cannot wait. An addendum can be added to the contract to hold parties accountable to what is written. This addendum will need to be signed prior to closing.
2. Ask any last minute questions. While you certainly can ask questions at your closing, if you have any lingering questions before the closing, you should ask them well in advance. Contact your loan officer about any mortgage questions, your attorney or title officer about questions relating to title, and your real estate agent about any other questions you may have about the deal.
   • You may have a concern that will take time to investigate, require the revision of documents, or require repairs to be made to the property. Such issues may mean that the closing cannot take place as scheduled, so make sure to have all your questions addressed well before the closing date.
3. Transfer utilities accounts. Prior to the closing date the buyer should arrange to have the home’s utilities accounts transferred into his or her name as of the closing date. Contact the individual utility companies and make the necessary arrangements.This step is often legally required for the closing to take place, and is also a great idea since it allows the home to be ready for move in on the closing date.

Completing the Closing Process

1. Set your closing appointment. Once you have satisfied all of your loan agreement requirements, and have determined that no issues with the property exist, you are now ready for your closing appointment. A closing appointment is handled by a closing agent, which is a third party recommended by the real estate agent or lender, who verifies all closing documentation and ensures that all payments are received by the relevant parties. Contact the closing agent directly in order to schedule a closing appointment.
   • The closing agent will schedule the closing appointment with the buyer and seller.
   • The lender will ensure that the closing documents are delivered to the closing agent.
2. Ensure that you have the necessary closing costs. Since closing costs are calculated to the exact date of the closing, you will not know the final closing amount until you have set your closing appointment date. Your mortgage lender will have provided you with an estimate of closing costs to use as a guideline, although that amount can fluctuate. In general, closing costs are about 3 to 5 percent of the total loan amount. In certain situations, a seller may be willing to pay the closing costs, though they are typically paid by the buyer.
   • You should ensure that you have the required funds available in your account as of the closing date. Most banks will place a hold on checks deposited into an account before they are available, so make sure to complete any necessary deposits into your account before the closing date.
   • On the closing date, you will likely need cashiers checks for the payments that need to be made at closing. Your real estate agent will let you know the exact amounts of the checks. The escrow officer will contact the buyer with the amount via the final HUD statement along with any wiring instructions. The money should be at the escrow office one day prior to closing and all of the documents need to be signed at least one day prior to closing. If the documents are not signed until later in the afternoon on closing day, there will not be enough time to close that day.
   • Any last minute and relatively small costs that may arise at the closing can usually be handled with a personal check.
3. Collect and review all relevant closing documents. Review the mortgage loan agreement and the mortgage note for potential discrepancies and errors. Also make sure to collect and review the Settlement Statement, which is typically used for residential real estate closings, and contains an itemized list of all of the closing costs associated with the mortgage loan. Make sure you have relevant documentation of your homeowner’s insurance, and a paid receipt of your first year homeowners insurance premium.
   • Make sure you have a cashier’s or certified check in the amount of your down payment and closing costs. Remember to contact the lender a few days before closing to obtain the exact closing amount needed. The escrow officer will usually relay this information to you. The lender approves the final settlement statement that the escrow officer prepares and the down payment goes to the escrow officer to be distributed.
   • Keep in mind that there are closing costs that are not associated with a loan too. If you can obtain a second mortgage or a refinance, or equity cash from your home or other property, then the closing costs will usually not be as high as a first origination loan. Talk this over with your lender.
4. Attend your closing meeting with the closing officer, lender representative and your attorney or realtor. The closing officer will lead the closing process and ensure that all relevant documents have been verified and signed, and that all of the sales transaction money has been properly distributed to the relevant parties. Some buyers have their attorney attend the closing, and in some circumstances both the seller and real estate agents will also attend a closing. However, it is also extremely common for both the sellers and buyers to complete all closing paperwork in separate rooms without ever seeing one another. The following documents will be reviewed by the closing officer:
   • The mortgage agreement, mortgage note and property deed.
   • The Settlement Statement containing an itemized list of closing costs, which typically includes all closing costs, a summary of all past transactions leading up to the closing, commissions paid to real estate agents, escrow amounts deposited to cover property taxes and insurance, title charges and the net amounts owed to seller and due from the buyer.
5. Complete the closing process. The final part of the closing process is the distribution of the funds generated by the sale. The closing officer will distribute the funds you provide, and present checks to the seller, real estate agents (when applicable), and to all other parties named on the Settlement Statement.

Tips

• Read through all of the documents your lender has given you, as well as those you got from your real estate agent, and your attorney. Make sure the deal you have in place is the one you were told you were getting. If any of the information does not make sense, ask the appropriate person to explain it to you. Buying a house is a big financial commitment, so make sure you understand what you are getting into.
• Have extra funds available in your account should the closing amount required be more than anticipated.

Sources and Citations

See also

• Pay Less Real Estate Commission
• Buy and Sell a Home at the Same Time
• Sell Your House Fast
• Hold an Estate Sale
• Sell Your House Using a Lease Option
• List for Sale by Owner Using MLS Listing
• Sell a Mobile Home
• Do Your Own Real Estate Closing
• Get Your House Appraised
• Sell Your Own House

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