You’ve put in an offer. It’s been accepted.
Now you go through the process of closing. Closing on a house generally takes 30 to 45 days… and it can be a stressful time.
Mostly, you’ll be sending in documents and (unfortunately) waiting.
But don’t panic. Many have gone through this process before you and have still landed at the closing table.
Let’s take a deeper look.
An Overview: Closing on a House
Closing on a house is the process of officially transferring the property from the seller to the buyer.
This usually happens about 30 to 45 days after the offer is accepted, although it can be sooner or later.
It’s important to note that during this time, the home is still technically owned by the seller… you’re just in the process of transferring ownership. You’ll work closely with your realtor, inspectors, and escrow settlement agent.
So what exactly happens during this time?
The following is a brief overview of the closing process:
- The buyer sends in their final loan application to the lender.
- The home inspection (unless waived) is completed.
- The appraisal is ordered and completed.
- The title search is ordered and completed.
- The loan is approved and legal documents are reviewed.
- The buyer signs the loan documents sent by the loan officer.
- A date is set for closing the real estate transaction.
- The buyer gets final approval from the lender.
- At the home closing, the buyer brings a cashier’s check to cover the down payment and closing costs.
It may sound complex, but as the buyer, there’s actually not that much you’re personally responsible for.
Don’t Make Any Changes to Your Credit!
No big purchases. No new credit lines. Nothing. Don’t buy the new car; don’t even look at the new car. Definitely don’t open a store credit line and buy furniture. The biggest issue you could encounter that you’re in control of is damage to your credit during the home buying process.
Your Home Inspection
If you haven’t already, you’ll need to get a home inspection.
A home inspection is an examination of the property to check for any major defects or problems. The inspector will look at the structure of the house, the plumbing, the electrical, and more.
If they find any major problems, they’ll include them in a report.
You can then use this report to negotiate with the seller to have them fix the problems or lower the price of the house accordingly.
The home inspection is generally done within a week or two of the offer being accepted. This is a time when you can back out; if the inspector finds major issues with the property, you may be able to pull your offer.
The appraisal is ordered by your lender to make sure the house is worth at least as much as you’re paying for it. Importantly, if it isn’t, the lender isn’t going to make up the difference; the lender will only loan based on the appraised value of the house.
If the appraised value comes in lower than the purchase price, you have a few options.
- You can negotiate with the seller to lower the price of the home.
- You can bring more cash to the table to make up the difference.
- Or, you can walk away from the deal.
You can also dispute an appraisal. But it rarely works. The only time disputing really works is if you can point to obvious mistakes, such as missing a room or missing square footage.
The appraisal is generally done within a week or two of the home inspection. But be aware that the appraisal can really hold up the sale of the property. Right now, appraisals are running behind because they’re an extensive process and because the market is moving so fast.
An appraisal is one of the few items you usually need to order yourself in advance. If you don’t order it in time, it could lead to the sale being delayed.
On the other hand, if you appraise higher than what you offered, you have instant home equity on closing day.
Your Title Search
A title search is done to make sure the seller actually owns the property they’re trying to sell you, and that there are no liens or encumbrances on the property.
In other words, it’s a way to make sure that you’re not going to get sued for someone else’s debt or have to deal with any other legal issues after you buy the house.
The title search is generally done within a week or two of the home inspection. But, as with the appraisal, it can really hold up the sale of the property.
The reason for this is that a title search can sometimes reveal problems that need to be fixed before the sale can go through.
For example, the title search might reveal that there’s a lien on the property for unpaid taxes. The seller would then need to pay off that lien before the sale could go through.
Don’t panic. Title searches frequently find issues that are just mitigated before the next step. Make sure you get title insurance to protect yourself against any potential mistakes.
Your Loan Approval
Your loan has been pre-approved at this stage but not fully approved. You just have a loan estimate until later in the closing process.
Full approval requires underwriting. You may find that your lender asks you for documents over and over, that they ask you for an incredible array of documents, or that they’re just generally very demanding.
If you want to close on time, return these documents to them within 24 hours every time. They’re just doing their due diligence.
Loan underwriting can take a few days or a few weeks.
It really depends on the lender and how fast they work. And the final approval (clear-to-close) usually doesn’t come until a few days before the sale (which can be very stressful).
Note that some figures may change throughout the loan closing, which is why you’ve been working with estimates so far. Your lender could discover that the property tax or final closing costs will be more expensive than you thought, which changes your mortgage payment. Your loan amount could even change, depending on appraisal and down payment.
You’ve sent in all your documents, the appraisal is done, the title search is clear, and your loan has been approved. You’re now “clear-to-close,” which is a specific real estate closing term that indicates that you are completely ready.
This means that everything is lined up and you’re just waiting for the sale to go through. You will get an email or phone call saying you’re clear to close just before everything is done.
Today, a lot of lenders will call your place of employment to verify that you’re still employed just a few days before you actually close. That’s why the clear to close takes so long.
The final step in the process is the closing itself.
Your Closing Date
The closing is when the sale of the home is finalized and you officially become the owner of the property.
At the closing, you will sign a lot of paperwork. You will also need to bring a cashier’s check or wire transfer for the down payment and closing costs, which can be several thousand dollars.
Note that you should have received your closing disclosure three days prior. Legally, you need to be given three days to look over your closing disclosure by your closing agent. But this is your right as a buyer; you can waive the right to this closing disclosure if you need to close fast.
The closing usually takes place at the office of the title company or closing attorney. Your real estate agent will be present. It can take anywhere from 30 minutes to a few hours, depending on how complicated the sale is.
Once the closing is done, you will receive the keys to your new home. Congratulations, you’re done!
What Can Go Wrong During Closing?
The process of closing on a house can be very smooth, or it can be very stressful. Not all of it has to do with the skill of your real estate agent; there are things outside of even their control.
There are a lot of things that can go wrong, and most of them are out of your control.
For example, the appraisal might come in low, the title search might reveal a lien on the property, or the loan might not be approved. On closing day, the sellers might not even show up!
The best thing you can do is to be as prepared as possible and to have realistic expectations. Make sure all the closing documents have been sent in on your side and work closely with your escrow agent and mortgage lender.
The process can take longer than you expect, and there might be some bumps along the way. But, as long as you stay calm and patient, you will eventually get the keys to your new home.
When Closing Takes Too Long
You may have noted that your initial purchase agreement sets a closing date. So, what happens when you exceed that date?
Usually, you just have to get an extension. But if you’re in a hot market and the closing date has been missed because of your financing (or other issues on your side), the seller could potentially pull the contract.
That’s why it’s in your best interest to make sure the closing goes as smoothly as possible, by scheduling things proactively and also furnishing documents on time.
That’s what you should expect when closing on a house. But not every closing goes easily. You may encounter issues with the appraisal or inspection, you may encounter issues with your lender… you could even find yourself switching lenders.
A real estate agent can help walk you through the home closing process. In the worst-case scenario, you might need to involve a real estate attorney.
What to avoid when closing on a house?
There are a few things you should avoid when closing on a house, such as missing scheduled appointments, failing to communicate with your agent or lender, signing documents without reading them, or missing the appointment entirely!
Does closing on a house mean you get your keys?
Yes, typically once the closing is completed and all the documents are signed, you will receive the keys to your new home. The exception could be if you’ve offered to lease the house to the previous owners for some time.
Can a mortgage fall through during closing?
It’s not common, but it can happen. If the appraisal comes in low, for example, the lender may not approve the loan. The title search might also reveal a lien on the property that needs to be paid off before you can close.
Can a mortgage be denied after closing?
It can, but it’s very rare. The most common occurrence is if you received the loan under false pretenses, such as buying a rental property with a loan for an owner-occupant. You’ll usually be given some time to mitigate the issue, after which the loan will be recalled and considered due.