Closing on a real estate purchase may seem like one simple aspect of the larger process of home buying. However, closing usually requires several steps that may take weeks to complete. Buyers need to understand each part of closing and the general timelines in which they should expect to finish each one. They also need to know the primary actors involved in the closing process. With this information, buyers will know what to expect from the closing process, and what they must do to reach the end.
For many people, mortgage financing and the mortgage approval process are the biggest hurdles to clear in order to get to closing. Someone who is paying for the property entirely in cash may have much less paperwork and approval steps to get through before they can take ownership. As part of the financing process, buyers may need to:
- get mortgage pre-approval
- lock in an interest rate
- establish that they have the proper assets for a down payment
- provide documentation of any financial assets or concerns
- complete the lender's underwriting process
Buyers are not obligated to take the loan, even if they complete all the steps, until they sign the final paperwork.
Most home buyers only have a few contingencies that may prevent them from being able to proceed with the home purchase. These contingencies usually allow the buyer to cancel the contract without losing their earnest money deposit. Typical ones include:
- home inspection
- sale of previous home
The closing process usually sets specific deadlines for each contingency. As one is met, the buyer and their agent can move to the next one.
3. Title and Insurance
During the closing process, buyers need to verify that they have clear access to the title and that they can insure the property. Usually, a title company does a search to confirm that the title is clear of any property liens that will not be removed by the nature of the sale. The process also typically includes the purchase of title insurance. This common closing cost provides some protection to the new owner in the event that a claim on the title comes up after closing. Most buyers must also prove that they have homeowners insurance for the dwelling, usually an amount set by the mortgage lender.
4. Final Days
A few days before the final closing, the lender will provide a Closing Disclosure. It includes the final terms of the loan, which should be the same as the Loan Estimate provided at the beginning of the financing process. This is the time to perform a final walk-through, to confirm that everything agreed upon for the property is in order.
If buyers need to make a down payment, they may be given instructions to make a wire transfer. Wire fraud is a growing problem, so it is vital for buyers to confirm that they have the right information from the lender before making the transfer. Assuming that all other contingencies have been lifted, the buyer's agent will let them know when they are ready to close and set a closing date.
5. Closing Day
The day of closing is essentially the end of the process. El Segundo home buyers will meet with the organization managing the documentation of the sale. On this day, the buyer signs for the loan, the bill of sale, the deed, and other paperwork. Any closing costs that were not paid in advance or covered in another way must be paid at this time. Buyers usually need to bring a cashier's check to cover the difference. Once everything is complete, the sale is recorded and the buyer takes ownership of the home.
The closing process starts with a mortgage application and ends with a set of keys. The time spent is variable, but usually takes weeks. With a better understanding of the common aspects of closing, buyers can be prepared to complete each step.