WHAT BUYERS SHOULD EXPECT WHEN CLOSING ON A HOUSE

Finally closing on a house is an exciting time, but it can be a little daunting. You’re finally on the final leg of purchasing a home, so you want to make sure everything works out correctly.

It signifies the culmination of your home-buying journey, marking the moment when you transition from prospective buyer to proud homeowner. However, the closing process can seem intricate and overwhelming. Ensuring a smooth transition requires understanding the steps involved and preparing accordingly. Here’s what you need to know to navigate the closing process with confidence.

  • What is Closing? An overview of the closing process in real estate transactions and its significance.
  • Preparing for Closing: Key steps buyers should take to prepare for a smooth closing experience.
  • Time to Close: Discussing the typical timeline for closing and factors that can influence it.
  • Cost of Closing: An explanation of the various costs associated with closing on a home.
  • Signing Day: What to expect on the day you sign your closing documents, including necessary preparations.
  • Closing Day: The final steps in the closing process, culminating in the transfer of ownership.

WHAT IS CLOSING?

Closing, often referred to as “escrow” marks the final step in the process of purchasing a home.

It’s the point at which the ownership of the property is officially transferred from the seller to the buyer.

This process involves several key components and participants, including the buyer, seller, real estate agents, lender, and the closing agent.

Here’s a breakdown of what happens during closing:

Key Components of Closing on a House

  1. Finalizing Loan Documents: If the purchase involves obtaining a mortgage, the buyer finalizes their loan documents with the lender. This includes signing the mortgage or deed of trust, which pledges the property as security for the loan.
  2. Signing Legal Documents: Both the buyer and seller sign numerous legal documents. The buyer typically signs more, including
    • The closing disclosure (outlines the costs associated with the mortgage)
    • The mortgage note (promises to repay the loan)
    • The deed (transfers ownership of the property).
  3. Paying Closing Costs: Both parties are responsible for certain costs associated with the sale, which can include appraisal fees, title insurance, attorney fees, and more. The buyer usually bears the brunt of these costs, but some may be negotiated to be paid by the seller.
  4. Title Search and Insurance: A title search is conducted to ensure the property is free from liens or claims. Title insurance is then purchased to protect the buyer (and lender) from any future issues with the property’s title.
  5. Funds Exchange: The buyer pays the remaining balance on the purchase price, typically covered by a combination of mortgage financing and a down payment. This also includes any closing costs not covered by the loan. The funds are usually wired to the escrow or closing agent.
  6. Recording Legal Documents: After the closing, documents such as the deed and mortgage are recorded in the local property records office, making the transaction a matter of public record.
  7. Key Exchange: Once the documents are signed and funds distributed, the seller hands over the keys to the property, and the buyer officially becomes the new homeowner.

HOW SHOULD I PREPARE FOR CLOSING?

The biggest thing that should be done to prepare for closing on a house is to ensure you are in constant communication with your team, and you are providing them with all the necessary paperwork in a timely manner.

Some tasks that need to be completed before closing include

  • Home Inspection
    • A thorough inspection of the property should be conducted to identify any potential issues that may need to be addressed before closing.
    • If an inspection addendum was included in your purchase and sale you will have 10 business days unless otherwise negotiated to hire and complete your home inspection and submit your form 35r.
  • Loan Approval
    • Final approval of the mortgage loan is crucial, including completing all underwriting requirements set by the lender.
    • Keep your eye open for communications from your lender and lender team.
  • Appraisal
    • The lender will require an appraisal to confirm the property’s value meets or exceeds the purchase price.
    • The lender will order the appraisal. Wait for the appraisal to be completed and discuss with your lender if the appraisal comes in lower than the purchase price.
  • Title Search and Insurance
    • A title search is conducted to ensure there are no liens or claims against the property, and title insurance is obtained to protect against future title disputes.
    • Review the title report and purchase title insurance to protect against future title issues.
  • Securing Homeowner’s Insurance
    • Buyers must procure homeowner’s insurance and provide proof to the lender before closing.
    • Provide proof of insurance to your lender and ensure the policy is in effect by closing.
  • Final Walkthrough
    • A final inspection of the property is performed to ensure it is in the agreed condition and that any agreed repairs have been completed.
  • Review Closing Disclosure (CD)
    • Legally, you must receive the Closing Disclosure at least three business days before closing.
    • Review the CD carefully for accuracy, understanding your loan terms and closing costs.
  • Prepare Funds for Closing Costs
    • Prepare to pay the closing costs and down payment.
    • Verify the total amount you need to bring to closing and arrange for a cashier’s check or wire transfer.
  • Utilities and Services
    • Set up utilities and services to start in your name from the closing date.
    • Contact utility companies to arrange for service transfers or new services.
  • Identification and Necessary Documents
    • Ensure you have the necessary identification and documents for the closing.
    • Bring a valid photo ID and any other documents your closing agent or lender has requested to the closing appointment.
  • Closing Appointment
    • Confirm the details of your closing appointment.
    • Verify the time, location, and attendees required for your closing meeting.

HOW LONG DOES IT TAKE TO CLOSE?

The average number of days for a home to close in Washington State, particularly for transactions involving financing (i.e., those with a mortgage), typically ranges between 30 to 45 days. This timeframe is a standard estimate that reflects the period from when an offer is accepted to when the transaction is fully completed and the property officially changes hands.

Studies have shown that up to 32% of house closings are delayed and almost half of them are due to financial issues.

Often times this is due to the buyer changing or loosing jobs, or a change in credit report such as a major purchase or a missed payment.

A general timeline:

  1. Cash Purchases: Transactions involving cash can close relatively quickly, often within 1 to 2 weeks, since there are fewer requirements and no lender involved.
  2. Financed Purchases: For purchases involving a mortgage, the typical closing timeline is between 30 to 45 days. The exact time can depend on the lender’s requirements, the loan type, and the underwriting process.
  3. Other Factors Affecting Timeline:
    • Appraisal and Inspection: Scheduling and completing the appraisal and home inspection can influence the timeline. Any issues that need resolution can add time to the process.
    • Title Search and Insurance: Conducting a title search and obtaining title insurance are necessary steps that can vary in duration.
    • Underwriting: The lender’s underwriting process, including verification of financial information and the property’s value, can introduce variability in the closing timeline.
    • Contingencies: Sales often include contingencies (such as the sale of the buyer’s current home) that must be met before closing, potentially extending the timeline.
    • Market Conditions: During peak real estate seasons, the increased volume of transactions can slow down processes like appraisals and inspections, as professionals in those fields are in higher demand.
The Key To Closing On Time Is To Make Sure You Have The Right Representation

The right real estate agent will keep up with all your contingency dates and keep the transaction moving forward smoothly.

The right mortgage broker will have paired you with the best possible loan program that you qualify for and will manage the loan through the process to ensure that all the underwriters needs are met.

The right escrow closer will ensure that all documents are collected, signed and all fees are collected and sent off for recording on time.

The right attitude will ensure that you are delivering all documents requested truthfully and timely.

Other factors that could cause a delay include

  • An issue popping up in the home inspection
  • The appraisal not matching to purchase cost
  • HOA Problems
  • Neighborhood Review

Sometimes, if a home inspection does not come back as you had hoped, an additional bargaining chip that can be offered is a home warranty plan to cover any future damages or replacements that will arise after the purchase has been made or use the warranty to performs any current repairs that need to be made.

HOW MUCH DOES IT COST TO CLOSE ON A HOUSE?

You can expect to pay three to four percent of the purchase price of your home in closing costs.

So, on a $400,000 house you should expect to pay between $12,000 and $20,000 in closing costs in addition to your down payment.

Typical Closing Costs For Buyers

  • Loan Origination Fees: Charged by the lender for processing the new loan application; it’s often calculated as a percentage of the total loan amount.
  • Credit Report Fee: Covers the cost of checking the buyer’s credit history.
  • Appraisal Fee: Pays for the appraisal of the home, which the lender requires to ensure the property’s value meets or exceeds the loan amount.
  • Title Insurance: Protects the buyer and the lender against any unseen claims against the property. There are two parts: the lender’s title insurance and the owner’s title insurance.
  • Escrow Fees: Charged by the company handling the escrow process; often split between buyer and seller.
  • Recording Fees: Charged by the county to record the sale of the property, making it part of the public record.
  • Inspection Fees: Covers the cost of any home inspections, including general home inspection, pest inspection, or specialized inspections like radon.
  • Survey Fees: If a property survey is required, this fee covers the cost.
  • Prepaid Expenses: Includes prepaying interest on your mortgage, property taxes, and homeowner’s insurance.
  • Underwriting Fees: Charged by the lender for the cost of evaluating the loan application.

Keep in mind, however, that you can use closing costs as a bargaining chip when negotiating the price of the home, by requesting that the seller pay part of all of your closing costs when you purchase the home.

WHAT DO I BRING ON SIGNING DAY?

Typically your escrow closer will schedule you to sign the final documents a few days before the closing date.

This can be done by going into their office, or a mobile signer can be sent out to you if that is more convienent.

Thankfully, your escrow company closer and mortgage loan officer will provide you with a checklist of everything you need to bring, outside of what they are already bringing.

Typically, what you will need is your

  • Photo identification
  • Any outstanding documents for the title company or mortgage loan officer
  • If you have not scheduled a wire transfer, a cashier’s check for the closing company with the total amount of the closing costs due
  • Your checkbook for the difference between the estimated balance owed and the final amount
  • Proof of homeowners insurance
  • A well rested signing hand

A lot of signatures will be made on signing day, but thankfully that is because you are about to obtain the keys to your new home!

You can expect to pay any remaining closing costs due, you will sign all pertinent documents to transfer ownership of the house to you, you will sign a settlement statement that lists all costs related to the home, a mortgage note promising you will pay the loan and a mortgage deed of trust that will secure the mortgage note.

WHAT HAPPENS ON CLOSING DAY?

It is possible that signing day and closing day are the same day, however it is generally a day to 3 days after you signed.

Escrow packages all the documents up and sends them over to county to be recorded.  This often takes places around 11 or 12 in the afternoon.

Once County recieves the documents they need to record them and will get a recording number, a unique number given by the county recorder’s office to a properly executed legal document thereby making it part of the public record.

It is common practice that at this time the Selling agent and Buying Agent will exchange the keys and your buyers agent will schedule a time for you to receive the keys.

However, according to the NWMLS purchase and sale page  paragraph F:

“This sale shall be closed by the Closing Agent on the Closing Date. If the Closing Date falls on a Saturday, Sunday, legal holiday as defined in RCW 1.16.050, or day when the county recording office is closed, the Closing Agent shall close the transaction on the next day that is not a Saturday, Sunday, legal holiday, or day when the county recording office is closed. “Closing” means the date on which all documents are recorded and the sale proceeds are available to Seller. Seller shall deliver keys and garage door remotes to Buyer on the Closing Date or on the Possession Date, whichever occurs first. Buyer shall be entitled to possession at 9:00 p.m. on the Possession Date. Seller shall maintain the Property in its present condition, normal wear and tear excepted, until the Buyer is entitled to possession. Seller shall either repair or replace any system or appliance (including, but not limited to plumbing, heat, electrical, and all Included Items) that becomes inoperative or malfunctions prior to Closing with a system or appliance of at least equal quality. Buyer reserves the right to walk through the Property within 5 days of Closing to verify that Seller has maintained the Property and systems/appliances as required by this paragraph. Seller shall not enter into or modify existing leases or rental agreements, service contracts, or other agreements affecting the Property which have terms extending beyond Closing without first obtaining Buyer’s consent, which shall not be unreasonably withheld. If possession transfers at a time other than Closing, the parties shall execute NWMLS Form 65A (Rental Agreement/Occupancy Prior to Closing) or NWMLS Form 65B (Rental Agreement/Seller Occupancy After Closing) (or alternative rental agreements) and are advised of the need to contact their respective insurance companies to assure appropriate hazard and liability insurance policies are in place, as applicable.”

“By 9 pm on closing day, you’ll have the keys to your new home, marking the start of a new chapter in your life.”

CONCLUSION: YOUR PATH TO HOMEOWNERSHIP

Closing on a home is a significant achievement that requires careful preparation and understanding of the process. By staying informed and working with the right professionals, you can ensure a smooth transition into homeownership.

Remember, each closing journey is unique, and flexibility, along with a positive outlook, will be your best allies.

READY TO TAKE THE NEXT STEP?

If you’re preparing for your home closing or just beginning your home-buying journey, remember that knowledge is power. Stay connected with us for more insights, and let us guide you to the doorstep of your new home with confidence and peace of mind.

We are attempting to outline the closing process as it typically occurs, however, the process can deviate due to any number of issues that may arise. Remember to remain flexible during this process, and to stay in touch with your real estate broker, loan officer, and closing agent regarding the status of your closing process.

Originally Posted:  https://www.themadronagroup.com/what-homebuyers-should-expect-during-closing/

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