The journey to homeownership is filled with anticipation, excitement, and at times, a fair amount of uncertainty. After overcoming various hurdles, from securing a mortgage to negotiating with sellers, closing day is the final milestone between you and your dream home.
However, many prospective homeowners wonder how long the closing process takes and what they can expect on this momentous day.
In this blog post, we will tackle the concerns surrounding closing day by delving into the intricacies of the process, the various factors that can influence the duration, and practical tips to ensure a smooth and efficient closing experience.
By shedding light on what to anticipate on closing day, you will be better prepared to navigate this final step confidently and easily, ultimately bringing you one step closer to the keys to your dream home.
What is Closing Day?
Closing day is when you finalize all the paperwork and officially become the owner of your new home. Technically, it can also be the day you sell your old home—but if that’s the case, you probably already know exactly how long closing takes.
The entire process usually takes about two hours, but it can vary depending on the complexity of the transaction and the number of people involved.
After everything is signed and sealed, you’ll be given the keys to your new place and can finally start moving in.
Who Attends Closing?
While it varies from state to state, the buyer and seller must typically be present. In some cases, only the buyer will need to be there, while in others, everyone involved in the sale (including the real estate agents) will be required to attend.
For a large or commercial transaction, it’s also common to have a real estate attorney present. You always have this option, but it’s unnecessary for most transactions.
What Happens on Closing Day?
The closing process begins with a final walkthrough of the property. The walkthrough gives you one last chance to ensure everything is in order and that any agreed-upon repairs are finished.
Once you’ve completed the final home inspection, the documents will be signed. Both you and the seller need to sign your paperwork, although not simultaneously. It just works better to schedule it that way. The buyer and seller often won’t see each other when they sign their closing documents.
The closing agent or attorney will review all the documents to ensure you understand everything you sign. These documents include the purchase contract, title insurance, mortgage loan documents, homeowners insurance policy, etc.
Once you’ve signed everything, the closing agent will collect all the necessary funds (including your down payment) and officially transfer ownership of the property to you.
What Do You Sign on Closing Day?
The closing process involves a lot of paperwork, most related to your mortgage loan. You’ll need to sign the mortgage note, a promissory note outlining the terms of your loan, and the mortgage deed, which secures the loan with your home. You’ll also sign various disclosures and agreements related to your loan, the property, and your rights as a homeowner.
But closing day won’t be your first time seeing all those documents. Usually, you’re given these documents at least a few days before signing them, so you can thoroughly review them.
Do You Need to Read All the Paperwork?
You should read all the paperwork before signing it, but it can be dense and confusing. The reality is that most of the paperwork will be boilerplate and is offered up in good faith.
At the very least, you should read the purchase contract, mortgage note, and deed of trust or mortgage deed. Ask your real estate agent or loan officer for clarification if anything looks off or you don’t understand something.
Check all the numbers to ensure that they align with what you expected. It’s not impossible that things could be incorrect.
Why Does Closing Day Take So Long?
Your closing day can seem like it takes forever, but there’s a good reason for all the waiting around. The closing process is fairly complex. You’re insulated from the transaction’s most complicated mechanics as a buyer or even a seller.
Although you must sign the paperwork, someone else must create and review it. Title agents have conducted title searches to ensure you own the home free and clear. Before it can be finalized, everyone must sign off on the sale, from the real estate agents to the title company to the mortgage lender.
What can you do to speed up the process?
One of the best things you can do is be as prepared as possible. Ensure you have all your financial paperwork in order and understand all the documents you’ll need to sign. It’s also a good idea to understand the closing process before going into it. That way, you’ll know what to expect and won’t be caught off guard by any steps.
What Can Delay Your Closing Day?
There are a few things that can cause delays. One of the most common is a problem with the title search. The title company will search public records to ensure no outstanding liens or judgments against the property. It must be resolved before the sale can go through if they find something.
Another common delay is an issue with the appraisal. The lender will order an appraisal to ensure the home is worth at least as much as the loan amount. If the appraised value comes back lower than the loan amount, you’ll need to renegotiate the home price or make up the difference in cash.
Finally, delays can also be caused by the buyers or sellers. If either party is late completing their paperwork, sending in closing costs, or providing required documentation, it can hold up the closing process.
There have been closings when the buyer or seller didn’t show up!
What Do You Need to Do to Prepare for Closing?
If you’re the buyer, you must do only one thing beforehand. You need to make sure you will have your funds available.
Whether walking in a cashier’s check or trying to wire transfer money to the closing escrow company, you need those funds available on the closing day. If those funds aren’t available, the closing could get delayed.
What Happens If You Miss Your Closing Day?
If you miss your closing day without warning, the home sale will likely be canceled. You may lose any earnest money you put down.
But this is rare. Usually, you will ask for an extension if you’re about to miss your closing day. Your real estate agent and the lender will both stay on top of the timeline and let you know if this is about to happen.
The most common reason for an extension is that the lender needs more time to process your loan. You might not have your clear-to-close yet because of an issue with the appraisal or because the lender just hasn’t finished underwriting.
What Can Change on Your Closing Day?
The loan terms, such as closing costs or interest, can change on your closing day. However, you should have received a closing disclosure update 72 hours before the closing date. If you didn’t read the closing disclosure, you may only see the changes at the closing table.
If you’re getting a mortgage, the interest rate could change if it wasn’t locked in. The loan terms could also change if you cannot get insurance on the property, or the closing costs may change if the appraisal comes back lower than expected. But you aren’t legally obligated to accept these terms if you didn’t receive the final closing disclosure 72 hours prior (although you can waive this requirement if you still want to close).
In general, the home seller cannot change things or attempt to renegotiate with the home buyer at this time. You already have a deal with the home seller, and they don’t have any additional leverage. There may only be exceptions for strange scenarios, such as the home seller not being able to finish repairs to the property and you accepting a credit instead.
When Do You Get Your Deed?
The deed is the legal document that transfers property ownership from the seller to the buyer. You will usually get your deed on closing day.
However, there can be situations where you might not get the deed on closing.
For example, if you’re getting a mortgage, the lender could hold onto the deed until the loan is paid off. This is rare today, but it can happen, depending on the lender and your state.
In other cases, the deed might be recorded with the county on the closing day, but you might not receive the physical document until a few days later. You should watch your mail carefully.
But while the deed is very important paperwork, you shouldn’t panic if you don’t get it or you lose it. Regardless, it will be recorded with the county.
What Questions Should You Ask at Closing?
Ask what each document is, its purpose, and the consequences of your signing it. As you sign documents, ask whether you’ve seen the documents before (whether they have been sent to you) and, if so, when they were last revised. This will give you better insight into whether you should scrutinize them more thoroughly.
Realistically, you can’t read all the documents they set before you thoroughly during a closing. Reading and understanding most of the legal jargon would take multiple days. But there are things that you need to pay more attention to, such as the sheets outlining your responsibilities and the costs you will need to pay.
Furthermore, pay attention to any numbers that don’t correlate with the numbers that you know. Either there have been changes to your calculations (which you need to consider), or there may be mistakes. Since most of the verbiage is usually boilerplate in these transactions, the mistakes are most likely to pop up in the numbers that must be manually entered.
What if Your Loan Estimate is Different?
This should never happen. Around 72 hours before you sit at the closing table, you should receive your final loan numbers from your lender. This is a legal requirement. You do not have to sign anything if you did not receive this estimate or if this estimate is now different.
The most common reasons for a change in the loan estimate are an increase in the interest rate or a change in the fees. If you’re unhappy with the changes, you can walk away from the table, but you will lose the property.
To avoid confusion, review all the documents sent to you before closing. Don’t just assume that you can review them and make changes at the closing table; once you sit there, the deal is already set.
Closing day is the final step in buying a home. It may feel stressful, but that’s because a lot is going on. As a buyer, you must follow the advice and direction of your real estate agent and lender.
If you experience problems leading up to the closing day, communicate this beforehand. Most real estate agents can get an extension on closing if the problem is out of their control. However, if you caused the issues, be prepared for the seller to pull out.
The closing agent is responsible for ensuring that all the paperwork related to the sale is completed and filed properly. They will also coordinate with the lender, title company, and other parties involved in the sale to ensure everything goes smoothly on closing day.
The buyers, sellers, their respective real estate agents, and the closing agent will usually be present at the closing. The lender may also send someone to represent them.
A good faith estimate is a document that lenders must provide to borrowers that outlines the estimated costs of the loan. This includes things like origination fees, third-party fees, and closing costs. You’ll get this to review early, so nothing during the closing should be a major surprise.