Congratulations! You’ve found your dream home, made an offer, and now you're just one step away from owning it: closing. As you prepare for the final stretch, it’s crucial to know what happens during this phase to ensure everything runs smoothly. Here are six essential steps every homebuyer should expect when closing on a home.
1. Choosing a Closing Agent
The first step is selecting a closing agent. Often, your real estate agent will recommend a professional they trust—a title company, escrow company, or settlement company. This agent will handle the closing process, ensuring all paperwork is in order and that the transaction proceeds without delays. While most buyers rely on their agent’s recommendation, you can choose your own closing agent if you prefer.
The closing agent plays a pivotal role, coordinating between you, the seller, and your lender to make sure the process stays on track.
2. Drafting an Escrow Agreement
Once the sales contract is accepted, the closing agent will draft an escrow agreement. This agreement outlines the terms of the sale and ensures both parties fulfill their responsibilities. Your deposit, also known as earnest money, will be placed in an escrow account, where it will remain until the closing is finalized.
This neutral account guarantees that funds are secure and ready to be transferred when the sale is complete.
3. Conducting a Title Search
A key part of the closing process is verifying that the title is clear of any issues. The title company conducts a thorough search of public records to ensure there are no liens, easements, or claims against the property. If any issues are found, they are typically resolved by the title company before the transaction moves forward.
Once the title is confirmed as clean, the title company will issue a title insurance policy, protecting you from any potential future claims on the property.
4. Shopping for Title Insurance
There are two types of title insurance you’ll need to consider: the Lender’s policy and the Owner’s policy. The Lender’s policy protects the lender for the amount of your mortgage, while the Owner’s policy covers your investment in the home.
While your lender will require the Lender’s policy, it’s highly recommended that you also purchase an Owner’s policy for added protection. The cost of this policy varies by state, so be sure to check with your closing agent for guidance on who typically pays for it in your area.
5. Receiving the Closing Disclosure
At least three days before closing, your lender is required to provide you with a Closing Disclosure. This document outlines all the final details of your loan, including the amount you’ll need to bring to closing and a breakdown of closing costs.
If any significant changes occur—such as an adjustment to the APR, a change in the loan product, or the addition of a prepayment penalty—your lender must issue a revised Closing Disclosure. This triggers a new three-day waiting period before closing can proceed.
For smaller changes, an updated disclosure can be provided without delaying your closing date.
6. Preparing for the Final Closing
As the closing date approaches, your closing agent will coordinate with the seller and your lender to finalize the details. The agent will ensure all paperwork is complete, and any outstanding issues have been resolved. Once everything is in order, a final date, time, and location for the closing will be set.
On closing day, all that’s left for you is to review the paperwork, sign the necessary documents, and officially take ownership of your new home. While you’ve been busy preparing for the move, your closing agent has worked behind the scenes to make sure everything is ready for the big day.
Conclusion
Closing on a home can seem like a complex process, but by understanding these six key steps, you’ll be well-prepared for the final leg of your homebuying journey. With an experienced closing agent on your side, you can feel confident that everything will go according to plan, bringing you one step closer to unlocking the door to your new home.
