Closing on Your New Home Purchase

In real estate “Closing” is the term for completing the deal and transferring a home or property from a seller to a buyer. (It’s also known as the “settlement” or “escrow” in various parts of the country.)

So when you go to the closing table, it should be the final step of your new home purchase because you have:

• Searched for and found a new home
• Had the home inspected
• Made an offer on the home, negotiated the offer and settled on a price
• Applied for a mortgage and secured a final loan approval and commitment from a lender
• Conducted a final walk through of the home

There is now light at the end of the long tunnel that is the path to home ownership. If you have done all your homework and completed all of the steps above and used the other advice we have offered in our Home Buyer’s Checklist series of articles, you should be able to approach the closing with confidence because your preparation and persistence should have eliminated any anxiety or doubt about this big day — closing day — when you’ll be signing on the dotted line.

What to Expect at the Closing Table and Final Settlement?

Closing usually take place at a title insurance company’s office, an escrow company’s office, a real estate attorney’s office or some other location, with someone acting as a closing agent. Your real estate agent, your mortgage broker or agent and/or you real estate attorney may also attend the meeting, but they often do not need to. In some locales, the sellers will also attend. There are often dozens of documents to sign. The closing agent should have reviewed all of the pertinent documents and have them organized for you to sign.

Several important legal and financial transactions will officially take place at closing, transforming you from buyer-in-waiting to new owner, including:

• Commitment in writing to the terms of the mortgage
• Payment of closing costs and associated fees
• Verification of homeowner’s insurance
• Transfer of property title to the new owner (you)
• Handing over the keys to your new home

Other documents and forms that you may be required to sign as a part of the closing include:

• The settlement statement
• The sales contract
• Loan papers
• Title insurance papers
• The title or deed
• Homeowner’s insurance verifications
• Down payment and closing cost documents, including any cash you must pay (or in some cases cash you will receive), in certified funds, to complete the deal

Depending on the terms and conditions of your transaction, there may be additional documents to sign.

The closing is the last chance you have to be sure that everything related to the home sales transaction is correct. In order to be properly prepared for this day and to speed up the process, you can prepare by knowing what else to expect. Your real estate agent can help youreview everything you need and prepare you for the closing.

In most cases, you will be able to go to your new home as the new home owner immediately after the closing.

Some of the items you will need to bring with you and be familiar with include:

• A closing cost estimate: You should have seen a few of these by now; bring the most recent statement with you. Already, your real estate agent should have provided you with an estimate of closing costs when you first signed the sales contract. In addition, your lender is required by federal law to provide you with a Truth In Lending (TIL) statement — also known as a good-faith estimate — as soon as you apply for a loan. The settlement statement (see below) should not deviate much at all from the most recent estimate. If it does, find out why before you sign anything.
• Homeowners insurance policy: You must get homeowners insurance in place before closing day. (You won’t start paying for it until the day you take ownership.) In many cases, your insurance agent can transfer coverage from your old home to your new home effective on a specific date and notify the closing agent with little bother. Ask the closing agent what kind of documentation is required to verify insurance in your state and bring any necessary documents or receipts for payment with you to the closing.
• Settlement statement: The closing agent should be able to provide a summary of the exact closing costs, known as the settlement statement a day or two in advance of the closing. This is not an estimate, but the exact amounts of money that will be exchanged to complete the transaction. Look at it closely and make sure there are no surprises. The amount of money you need at closing should not deviate much at all from your latest closing cost estimate. Now you can arrange for certified funds to cover closing costs and the down payment on your home. The settlement statement also specifies how all of the money will be disbursed. If you see anything amiss, notify your real estate agent immediately so that the statement can be modified.
• Certified funds: While your mortgage will cover the principal amount you will owe on your new home after the closing is complete, you will typically need cash, in the form of certified funds, to pay the down payment and closing costs. A cashier’s check or other certified check from a bank can be drawn at your direction. Don’t use cash.

If you have everything in order, the closing can last less than an hour. You might get writer’s cramp signing an initialing all the documents but you have reached the end of the tunnel and are looking a bright future in your new home.

If you plan in advance — and nobody tries any last-minute shenanigans — your closing can be relatively pleasant and stress-free compared to some of the other nerve-wracking experiences you’ve had on the path to home ownership. People often feel a great weight lifted from their backs when they exit the closing. They feel the new burden of responsibility of owning a new home. But the most overwhelming feeling is one of pride and satisfaction that they have completed the quest for a new home.

In our last article in this series, we discussed the final walk through. In our next post, we’ll discuss moving day. (It’s not quite over yet, happy home owner.)

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