The house closing steps are the final pieces in the process of buying a home. This is an important, exciting time. Closing your home is a big step, one that will end with you holding the keys to your new place.
While it might feel daunting, the entire house closing process can be boiled down to 10 manageable steps, and we’ll look at each of them in detail below.
What is a Closing?
When a house closes, the transfer of ownership from the seller to the buyer occurs. This period is sometimes called the escrow or settlement phase and can vary in duration, ranging from four weeks to around three months.
Two key areas will “close” during this period:
To close on your mortgage, you’ll need to complete and submit any paperwork that your mortgage lender requires.
To close on the title of your new home, the seller will sign the deed and provide it to the buyer, officially transferring ownership.
Step 1: Mortgage Pre-Approval
Mortgage pre-approval is arguably the most crucial part of the home closing steps process. Not only does it give you a clear understanding of how much you can afford to spend on a house once you have been pre-approved for a mortgage, but it also shows sellers you are qualified for a mortgage loan.
With pre-approval, you can quickly submit a purchase offer, often the same day you see the house. This can be a critical step in a hot real estate market. Many sellers won’t accept a purchase offer without mortgage pre-approval.
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Step 2: Sign The Purchase Offer
Second in the most important house closing steps is signing your purchase offer. Traditionally, this phase would require a trip to your real estate agent’s office to sign the required documentation.
Thankfully, with a little help from automation and social distancing requirements, most buyers and sellers can sign documents remotely without having to physically attend a specific document signing event. But be sure to check what kind of signing options your agency offers.
Step 3: Complete Your Mortgage Application
At this point, you’ll need to finalize your mortgage pre-approval by providing your licensed mortgage professional with the necessary paperwork and financial records to confirm your mortgage.
Because you’ve already been pre-approved for a mortgage, this is usually a relatively quick process, and you’ll be able to lock in the best available interest rate.
Once everything is finalized, you’ll receive the loan documents, including the terms of your loan, a loan estimate, and an approximate monthly mortgage amount.
Step 4: Decide on Closing Costs
From signing the purchase offer to getting new keys, all parts of the home closing steps seem to come with an associated fee or service charge, and that can all add up quickly.
Before you go any further, taking time to review your closing cost options can be advantageous. Some mortgages allow you to roll any closing costs into the total amount of your mortgages.
Some mortgages, such as the VA home loan program, allow the buyer to ask the seller to pay any associated closing costs. Your licensed mortgage lender will be able to go over all the options you have available and help you negotiate the best possible closing costs for your situation.
Step 5: Get a Home & Pest Inspection
While a home inspection isn’t a legal requirement to purchase a home, it can provide invaluable insight into the quality of the residence you hope to purchase. They’re also sometimes required from the lender.
A home inspection will help you discover any potential issues with your new home, such as old or damaged wiring, water damage from previous floods, or areas of the roof that may require attention. With this information, you can decide whether the property in question is really worth the time and money necessary to fix it.
Step 6: Title Company or Attorney Helps with Title Insurance
A title search is a key step to protecting your purchase and can be recommended by your Realtor or Lender if you do not have one that you have used in the past. A title search and title insurance guarantee that no one can attempt to claim your property at a later date. A title search:
- Reviews public records and confirms the legal owner of the property you want to buy
- Guarantees that the person selling the property is legally permitted to do so
- Highlights any claims against the property that might exist
While both a title company and a real estate attorney can take care of the title search and insurance, an attorney can also help to:
- Ensure your house closing adheres to state and municipality requirements
- Make navigating the complex terminology of the closing documents easier
- Help you understand your rights and responsibilities
In most states, you aren’t required to hire a real estate attorney.
Step 7: Have an Appraisal Done on the Home
Home appraisals help lenders ensure they aren’t lending more money than the home is worth.
Getting a licensed home appraiser to conduct a comprehensive inspection of the home you’re interested in buying is one important house closing step because it can impact how much money you can borrow.
A home appraisal determines the property’s actual value, which isn’t always the same as the listing price. Once they’ve completed their assessment, the home appraiser will provide a report detailing their findings.
If the home appraisal amount is lower than the price you want to offer, you could:
- Consider renegotiating the price. Requesting a lower asking price can be risky in a competitive market, but if the seller is willing to go along with your request, you could save a significant amount of money.
- Increase your downpayment to cover the difference between the lender’s amount and your offer price.
Step 8: Renegotiate Purchase Offer Based on Inspections, If Necessary
If the home inspection identifies significant structural or other costly issues, you might consider amending your original offer to reflect this new information. You might offer a lower price or request the seller fix, replace, or otherwise address items in the home inspector’s report.
The same applies to damages or infestations your pest inspector may have uncovered.
When buying a home, you benefit from having a clear understanding of the property’s true condition, what needs repair, and what doesn’t.
Step 9: Get Homeowners Insurance
Homeowners insurance, a type of property insurance covering private residences, protects your new investment against accidents, disasters, or theft. A typical homeowners insurance policy covers structural damage to your home, damages or theft of personal belongings — such as clothing, furniture, electronics, musical instruments, etc., as well as liability should someone become injured on your property.
Unlike renter’s insurance, homeowner’s insurance covers damages to the physical structure you live in. If your home sustains damage or is destroyed by natural or other disasters such as hail, windstorms, fire, or gas explosions, your homeowner’s insurance can help cover the cost of rebuilding or repairing your home.
If a person is injured or if their property is damaged on your property, liability coverage helps protect you against court costs as well as settlements you may have to pay.
Some homeowner’s policies also cover the expense of staying in a hotel or other temporary accommodations if your home isn’t liveable. These expenses can include things like eating at restaurants, storage fees, or short-term rental fees.
Step 10: Final Walkthrough and Closing Documents
Now that your mortgage is officially approved, you can expect to receive an official closing date from your agent as well as closing documents that outline your mortgage loan obligations, closing costs (if any), etc.
You’ll also do a final walkthrough of the home. This sometimes happens the day before or on the morning of closing. You’ll walk through the property to ensure that nothing has been damaged since you last saw the place.
If you requested that the seller remove any items, such as building materials, or that window coverings should remain, you could check on these as well.
If you’re happy with what you see, you’ll get the keys and can begin moving in!
If you are interested in getting pre-approved for your mortgage or have questions about any of the house closing steps listed above, reach out to the licensed home loan specialists at River City Mortgage. We can walk you through the entire homebuying process and help you decide what mortgage product is best for you and your family. Get in touch today.