Closing process walkthrough

Closing (also called settlement) is the final step in a real estate transaction where ownership legally transfers from seller to buyer and the mortgage is finalized. The process typically takes 30-45 days from accepted offer to closing day.

65 steps across 12 sections

1. Open Escrow

  • After offer acceptance, an escrow account is opened with a title company, escrow company, or real estate attorney
  • Earnest money (typically 1-3% of purchase price) is deposited into escrow
  • The escrow holder is a neutral third party managing documents and funds

2. Title Search and Title Insurance

  • Title company researches the property's ownership history
  • Verifies there are no liens, judgments, unpaid taxes, or ownership disputes
  • Any title issues ("clouds") must be resolved before closing
  • Title insurance policies are issued to protect buyer and lender (see topic #43)

3. Home Inspection and Negotiations

  • Buyer arranges and pays for inspections
  • Based on findings, buyer may request repairs, credits, or walk away (per contract terms)
  • Seller responds; parties negotiate and reach agreement

4. Appraisal

  • Lender orders appraisal to confirm the home's value supports the loan amount
  • If appraisal meets or exceeds sale price: Proceed normally
  • If appraisal comes in low: Buyer can pay the difference, renegotiate price, contest the appraisal, or walk away (if appraisal contingency exists)
  • Cost: $300-$700 (paid by buyer)

5. Mortgage Underwriting

  • Lender's underwriter reviews all documentation:
  • Income verification (pay stubs, W-2s, tax returns)
  • Asset verification (bank statements, investment accounts)
  • Employment verification
  • Credit report review
  • Debt-to-income ratio calculation
  • Underwriter may request additional documents ("conditions")
  • Important: Do not make large purchases, change jobs, open new credit, or move money between accounts during this period

6. Lock Interest Rate

  • Rate lock guarantees your interest rate for a specified period (typically 30-60 days)
  • Lock early to avoid rate increases; some locks have a "float down" option if rates drop
  • Rate lock expiration before closing can require an extension fee or rate renegotiation

7. Obtain Homeowner's Insurance

  • Lender requires proof of homeowner's insurance before closing
  • Shop for policies early; provide the insurance binder to the lender
  • First year's premium may be paid at closing or before

8. Review Closing Disclosure (CD)

  • Received at least 3 business days before closing (federal requirement under TRID rules)
  • Compare the CD to your original Loan Estimate (LE) for changes
  • Key items to review:
  • Loan amount and interest rate
  • Monthly payment (principal, interest, taxes, insurance)
  • Closing costs (origination charges, title fees, government fees, prepaid items)
  • If there are significant changes from the LE, ask your lender to explain
  • If certain terms change after the CD is issued, a new 3-day waiting period may be triggered

9. Final Walkthrough

  • Conducted 24-48 hours before closing
  • Purpose: Verify the property is in the same condition as when you made the offer
  • Check for:
  • Agreed-upon repairs have been completed
  • All included appliances and fixtures are present
  • No new damage has occurred
  • Seller's belongings have been removed (unless rent-back agreed)
  • All systems work (lights, plumbing, HVAC, appliances)
  • This is NOT a second inspection — it is a condition verification

10. Prepare Funds for Closing

  • Wire transfer is the most common method for closing funds (arrange 1-2 days before closing)
  • Cashier's check is an alternative (some closings require it)
  • NEVER send a personal check for closing funds
  • Wire fraud warning: Verify all wiring instructions by phone using a known number (not from an email) — wire fraud targeting real estate closings is a major risk
  • Amount needed: down payment + closing costs - earnest money already deposited

11. Closing Day

  • Government-issued photo ID (both buyer and seller)
  • Cashier's check or wire transfer confirmation
  • Proof of homeowner's insurance
  • Copy of the Closing Disclosure (for reference)
  • Any additional documents requested by the title company or attorney
  • Promissory note: Your promise to repay the mortgage
  • Mortgage/deed of trust: Gives the lender a lien on the property as collateral
  • Closing Disclosure: Confirms you reviewed and accept the terms
  • Deed: Receives ownership of the property
  • Affidavits and declarations: Various certifications (occupancy, identity, etc.)

12. Immediate Steps

  • Change locks on all exterior doors
  • Update address with USPS, employer, banks, subscriptions, etc.
  • Set up utility accounts in your name
  • File homestead exemption if applicable
  • Store closing documents safely (you will need them for taxes)

Sources

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