How to Close on a House

After agreeing to buy a home, you need to “close” on the sale. The process is quite complicated. You will need to order a home inspection and possibly apply for a mortgage. As your closing date approaches, you must walk through the property one final time, noting whether repairs have been made. At the closing, you will read dozens of documents and pay for your closing costs before you get the keys.

Part 1

Part 1 of 4:

Preparing a Couple Months Before the Closing

1
Receive the signed purchase agreement. You officially go into closing when the seller signs and returns your purchase agreement (also called a purchase offer). Realize you can change this agreement, e.g., if you uncover problems during the home inspection. Nevertheless, you are in closing under the assumption that the purchase agreement is final.^{[1]XResearch source} If all goes well, you'll close around 45 days after receiving the signed agreement (the exact time will depend upon the length of time denoted in the contract).^{[2]XResearch source}
- If you have a lawyer, give them the purchase agreement to review.
- Also send it to your lender so they can begin the underwriting process.
In some states, you must deposit 5-10% into escrow. The money will go toward your down payment if you stick to the contract and close as agreed upon, but if you violate the purchase agreement this money will go to the seller. Ask your real estate agent if you need to make this payment.^{[3]XResearch source}
3
Order a home inspection. A professional inspector should be hired to check the house for structural problems, building code violations, and appliances that don’t work. An inspection will protect you in case there is a major, undisclosed problem. Rarely, a lender may require an inspection before they will give you a loan.^{[4]XResearch source}
- Obtain a referral from your real estate agent or attorney. Alternately, you can look for an inspector online. A standard home inspection costs $300-500.
- Book an inspection as soon as possible after you receive the signed purchase agreement.^{[5]XResearch source}
4
Negotiate with the seller if there are problems. The inspection might have uncovered structural damage or other serious issues. At this point, the buyer has some options:
- Call off the purchase. Read your purchase and sale agreement. It should give you the right to back out of the sale if inspection reveals a serious problem. Talk with your lawyer.^{[6]XResearch source}
- Have the seller fix the problem. However, you might be pressed for time, and repairs could delay your closing. Also, you can’t be sure the owner will fix the problem properly.
- Negotiate a credit. Ask the seller to give you money so you can make the repairs yourself.^{[7]XResearch source} This might be the easiest option.
5
Complete your mortgage application. You might have been pre-approved for a loan. Now you need to actually complete the mortgage application. The application is 4 pages, and you’ll need to supply plenty of supporting documents, such as tax returns and bank statements.^{[8]XResearch source}
- It’s best to apply in advance, and then send documents about the particular home once you are under contract so the lender can complete the application. It can take a month for the lender to complete the underwriting process.
6
Read your loan estimate. Your lender should create a plain language document for you to sign and return. Be sure to sign this in a timely manner or it can delay the progress of your loan significantly. This document summarizes the details of your loan, including the following:^{[9]XResearch source}
- term length, e.g., 15 years, 30 years, etc.
- interest rate
- any prepayment penalty
- projected payments
- closing costs
- total cash amount to close
Your lender will want the house appraised, which the buyer will have to pay for. The purpose of the appraisal is to confirm the house is worth as much as you are paying for it. However, if the appraisal is low, then the lender might reduce the amount you can borrow. You might need to renegotiate the purchase price with the seller and amend your purchase and sale agreement.^{[10]XResearch source}
8
Obtain necessary insurance. Your lender will probably require that you provide proof of homeowners insurance before closing. Shop around to find the lowest rate. Normally you will be required to roll your first year’s premium in with the closing costs and pay at closing. For this reason, don't pay for your insurance in advance unless you are specifically instructed to by your lender.^{[11]XResearch source}
- You should also buy a title insurance policy. This insurance protects you in case there are problems with the title, such as contractor liens or unpaid taxes. Usually you will be required to use the title company processing the file, but it depends on how the contract has been written.
9
Decide how you want to take the property. You can own the property in different forms, which will affect who inherits the property when you die. Spend some time considering the options, and consult with a lawyer if necessary:^{[12]XResearch source}
- Sole owner. If you’re single and buying the home, then you can own it solely in your own name.
- Joint tenancy. When a couple buys a home together, they have more options. One is to own the house as joint tenants with right of survivorship. You own the property equally and, at death, the surviving partner becomes the full owner.
- Tenants-in-common. If you want to own unequal shares of the property, then you should take it as tenants-in-common. At death, the other partner does not automatically become the full owner. Instead, the deceased’s share will pass by will.
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Part 2

Part 2 of 4:

Preparing Before Closing

1
Receive a “Closing Disclosure” three days before. This is similar to the Loan Estimate received at the beginning of the process and lets you see your final interest rate, term, loan amount, cash to close, payment, fees and APR. Use this to compare what has changed through the lending process and to be sure you still want to close on the loan.
- You must sign this at least 3 days before closing if you are receiving a loan, so be sure not to procrastinate when your lender sends it to you or you could significantly delay your closing. You will review this again at closing.
2
Gather your documents. You should have received several documents during the home-buying process. Find them all so that you can review them ahead of your closing. Collect the following:^{[13]XResearch source}
- purchase and sale agreement
- loan estimate
- proof of title search
- proof of homeowners insurance
- home appraisal
- inspection reports
- closing disclosure
Talk to your bank about this at least a day before closing. You might be able to use a certified or cashier’s check, though this is uncommon these days, and a wire may be required.^{[14]XResearch source} The closing agent should tell you what is acceptable.
4
Walk through the property. You generally have the right to walk through the property 24 hours before your closing. Definitely take advantage of this opportunity. Check that the property is as expected, without any new damage, and that the seller has removed their belongings from the premises.^{[15]XResearch source}
- If you requested repairs, check that they were made. If they weren’t, contact your real estate agent to discuss your options, including delaying your closing.^{[16]XResearch source}
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Part 3

Part 3 of 4:

Attending Your Closing

You can certainly close on a house on your own. However, you might need a lawyer’s advice if anything confuses you or if surprising information appears on documents. Accordingly, tell your lawyer when the closing is scheduled and ask them to attend with you.
It generally takes up to two hours to complete a closing. If things move quickly, you could finish in one hour, but don’t count on it. Instead, budget for two hours so you don’t feel rushed.^{[17]XResearch source}
3
Bring necessary documents. You need to show the closing agent certain documents, so gather them ahead of time to take with you. Bring the following:^{[18]XResearch source}
- Photo ID. The closing agent needs to verify your identity, so have your driver’s license or passport with you. Bring a second form of ID as well, though this second form usually will not need to have a photo. Check to be sure.
- Purchase and sale contract. It’s good to have a copy with you, in case you need to refer to it.
4
Identify the people present. Several people will attend the closing in addition to the seller and the buyer. Don’t be surprised if there are quite a few people in the room. For example, the following may attend the closing:^{[19]XResearch source}
- The closing agent, who runs the closing.
- Attorneys. Both the buyer and seller can have an attorney. The closing agent might also be an attorney.
- A representative from the title company.
- Real estate agents.
- The buyer’s lender.
Many closing documents are written in confusing legal language. Take your time reading them and don’t let the closing agent rush you through the process. If you have questions, ask the closing agent, lender, or your lawyer before signing.^{[20]XResearch source}
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Part 4

Part 4 of 4:

Signing Documents

This document will explain your monthly mortgage payment. It should identify how much goes to interest, principal, taxes, and insurance.^{[21]XResearch source} If you have questions, ask the lender’s representative, who should be at the closing.
2
Read your closing disclosure. This document should explain the details of your loan. Read it carefully and make sure the terms match what your lender told you in the loan estimate. The statement should contain the following information:^{[22]XResearch source}
- amount financed
- interest rate
- annual percentage rate
- total cost over the life of the loan
This note is the agreement between you and your mortgage lender. It should contain information about the loan, such as the interest rate and prepayment penalties. Double check this note and confirm that the terms match those in the closing disclosure.^{[23]XResearch source} Sign this note to make it legal.
By signing this document, you pledge the home as security for your home loan. If you default, your lender can seize the home. Read the document carefully before signing it.^{[24]XResearch source}
5
Read your closing disclosure closely. You should receive this document at least three business days before your closing. It will outline all of your financial obligations, including your closing costs, insurance obligations, and a breakdown of your mortgage.^{[25]XResearch source}
- Compare this document to your loan estimate. The terms should be the same.
- If the closing cost estimates or the loan details have changed, stop the closing and talk to your attorney. Your lender or title agent could be violating the law by springing new terms on you at the closing.
These documents explain how the seller and buyer are dividing property taxes and possibly homeowner association dues. You may also split the cost of utilities. Review the papers to make sure they conform to your agreement before signing.^{[26]XResearch source}
7
Review and sign other documents. You might need to sign up to 30 documents (or more) at closing. Read each one carefully. If you have questions, ask your lawyer or the closing agent. Some other documents you must review include the following:
- Flood hazard statement. This document will identify whether your home is in a flood zone.^{[27]XResearch source}
- Declaration of reports. The buyer must acknowledge they have reviewed the inspection and survey reports.
- Abstract of title. This document records all documents that affect the property.
After you sign all documents and pay for your closing costs, you should receive the keys to your new home. Congratulations, you are now a homeowner!
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Expert Q&A

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Question
Do I need an attorney if I am paying cash for a house, or can I use just the title company? Do they draw up contracts? Do I have to have a survey and inspection?
Ryan Baril
VP, CAPITALPlus Mortgage
Ryan Baril is the Vice President of CAPITALPlus Mortgage, a boutique mortgage origination and underwriting company founded in 2001. Ryan has been educating consumers about the mortgage process and general finance for almost 20 years. He graduated from the University of Central Florida in 2012 with a B.S.B.A. in Marketing.
Ryan Baril
VP, CAPITALPlus Mortgage
Expert Answer
No you do not need an attorney, although you may want to be represented by an attorney or a realtor to ensure you are not taken advantage of. The contract will not be drawn up by the title company - either you can have an attorney or realtor do this for you, or you can do it yourself. When paying cash, a survey nor inspection is required, but you still should consider it to protect yourself in this large purchase.
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