Finally, it’s the closing day. It’s the most exciting part of your home buying journey. You have everything ready to transfer the property to your name — we know it wasn’t easy. That dream home is one signature away from being yours.
At this stage though, the keys are not with you yet. There are still a few important things you should take care of and finalize. So, it would be best to read up and get all the information you need. Knowing what to expect can make the concluding transaction run smoothly.
1. What Is Closing Day?
The closing day is the last stage of the home buying process. Both the buyer and the seller have to agree on the closing day.
If you push through with the purchase on the closing day, you will become the new and legal owner of that dream home after you sign the required documents.
2. When Does Closing Day Happen?
The closing day is usually set 35 to 45 days after the seller accepts your offer or signs the purchase agreement. Your real estate agent should provide you with enough time to secure your mortgage and purchase the title insurance.
Check your real estate purchase agreement contract if you’re not sure about the actual closing day.
Take note that even if the buyer and the seller have agreed on a closing day, it’s possible to postpone the date — that is if the agreement you signed allows it and if the seller agrees.
If the contract has a “time is of the essence” or TOC clause, it’s unlikely for the seller to give you an extension. After the designated date, both parties are free.
On the other hand, if your purchase agreement specifies the closing day as “on or about” a certain date, you will have more leeway. Buyers can usually extend for two to four weeks if there is an “on or about” clause.
3. What Do I Need To Prepare On The Closing Day?
It is good to get involved in every step of the home buying process. Buying a home is a huge investment and it’s crucial to know what’s going on.
With all the excitement, you might forget something. So, we suggest that you prepare a checklist.
There are certain things that you need to prepare and bring on the closing day. But don’t worry. Usually, the loan officer and the title company representative will provide you with a checklist.
What To Bring
Here are the items that you need to bring on closing day:
- Identification cards. Your passport or driver’s license will do. Closing agents have to verify your identity during closing.
- Insurance policy. Mortgage lenders require property insurance for at least a year. The lender should have a copy of this policy but it never hurts to be prepared.
- Closing Disclosure. The closing disclosure you received at least three days prior to closing may have changed. It’s better to bring this document so you can compare the one you received from the final closing disclosure.
- Cashier’s check or certified check for the closing costs and the downpayment. Your closing agent should inform you how much money you need to bring during the closing day. If you don’t hear from the closing agent, give him or her a call. Ask what you need to pay for and the payee for the check. Sometimes you may have to issue more than one check. If you wire the funds, do it a few days ahead of the closing day. This way, there will be enough time for the funds to clear.
- Final sales and purchase contract. You may want to check some items so bringing this document can be helpful.
- Personal check. In case there are last-minute changes in closing costs, it would be wise to bring your personal check.
- Additional documents required by your lender and title company.
If you’re getting divorced you may need to submit additional requirements. There are also cases where you need to bring lien waivers.
The best thing to prepare all the paperwork is to get in touch with your agent and ask if there is anything else you need to bring.
4. How Long Does The Actual Closing Take?
Your closing agent should hand all the loan documents that the buyer needs to sign. The seller should also affix his or her signature on the deed. Sometimes, there are other documents that require the seller’s signature
If the buyer and seller agree on everything, and both parties understand the documents they need to sign closing can be completed in an hour. However, there are cases when the actual closing takes several hours.
This happens when the closing agent needs to explain each loan document to the seller, the buyer or to both.
The closing day may be the last leg in your home buying journey but don’t rush to the finish line.
If a document looks fishy, don’t sign it right away. Consult your lawyer or agent first.
Your closing agent should also answer your questions patiently. Remember that everything you sign is legal and enforceable. Even before the ink dries you will be the property owner. This means that you will take on all obligations related to the property.
5. What Are The Possible Reasons For Closing Delays?
Closing delays happen. From June to August 2019, 27% of home buyers experienced delays. So, don’t be frustrated if you become part of that statistic. Most real estate transactions have to be pushed back because of these reasons.
Loan issues happen to be the leading cause of closing delays. In fact, 37% of home buyers experienced issues with obtaining financing according to the Realtors Confidence Index Survey for August 2019.
When you receive the mortgage commitment your loan is as good as approved. Even if your mortgage lender gives you the go signal for closing, some things may happen in the last minutes.
Shortly before your closing day, your lender should review your loan application. If they see irregular transactions in your account, they may ask for more requirements before they fund the loan. Complying with these requirements take time and delay closing.
Problems on Appraisal
There are times when an appraisal comes out lower than what you were expecting. A home’s value is calculated based on comparable home sales within a neighborhood and nearby communities. If the appraiser comes back with a low appraisal then you may be paying more than what the property is worth.
Take note that your lender will not approve a loan amount which is more than the appraised value.
Here are a few options that you can do when you are given a low appraisal:
- Haggle for a lower price.
- Hire a new appraiser to give you a second opinion.
- Don’t push through with the contract and let go of the home. Check the contingencies in your purchase agreement. If there’s an appraisal contingency, you won’t have issues with getting out of the contract.
- Pay out-of-pocket cash. If you don’t want the sale to fall apart despite the risks, you can make up for the difference by paying cash.
Aside from low appraisal, there are cases where the appraiser requires certain repairs. If the seller drags his or her feet, there may be delays in re-appraisal. There are also cases where the appraiser fails to perform the re-appraisal on time.
Problems Related To Uncompleted Repairs
Home inspections rarely come out perfect. There are usually issues – minor problems such as a cracked tile, failed window seals, and chipped paint won’t affect results that much. However, if there are major problems like roofing issues, you may have to request for repairs.
If the seller agreed to perform the necessary repairs, the work should be completed before the closing day. Closing delays happen when sellers forget to do these repairs or when they can’t complete it in time.
Your real estate agent usually checks up whether the seller completed the repairs prior to closing.
Problems With The Final Walkthrough
You want to avoid nasty surprises when you move in. Before you close on a home, you want to check on the home’s condition and this is known as the final walkthrough.
The final walkthrough usually happens on the night before closing. But some buyers conduct the final walkthrough a few days before closing.
Closing delays happen when buyers spot issues such as:
- Home damage after the seller moved out
- Utilities were shut off. It may take a few days to turn utilities back on.
- Seller removed included personal property
- Included appliances and HVAC are not working
- The seller failed to move out on the required date
6. What Can I Expect To Happen On Closing Day?
On the closing day, the buyer needs to pay the remaining closing costs indicated in the closing disclosure. This happens before the signing begins.
Once you’re done with that step, you can move on to signing documents.
After all the signatures are in place, the title company registers the new deed in the buyer’s name.
7. How Many Documents Will I Sign?
A lot —if you’re the buyer.
On the closing day, the seller needs to sign documents related to the property transfer. Meanwhile, the buyer has to deal with tons of paperwork.
If you’re the buyer, you better flex your fingers because you may have to sign 50 documents or so. The actual number of documents may vary depending on your lender and the requirements of your state.
While signing each document, read everything. Ask your attorney, if you have one, to help you go through everything. If you feel that a document includes certain details you did not agree to, bring up the issue with the appropriate party. You can also ask your real estate agent to assist you with unclear or technical details of the contract.
During the closing day, buyers usually need to sign the following:
Documents Related To Your Mortgage
- Closing disclosure. This contains the full details of your loan such as the interest rate, loan amount, annual percentage rate, closing costs, and other details.
- Mortgage note or promissory note. This makes you liable for repaying your loan.
- Truth in lending statement
- Deed of trust also known as your mortgage or security instrument. This allows the seller to foreclose the home if you can’t pay your loan.
Documents Related To The Property Transfer
- Title documents. This document records your right to the home.
- Transfer tax declaration. Some states impose a transfer tax and for that, you have to sign this document.
8. What Is The Usual Venue For Closing Day Appointments?
Closing usually happens at the escrow company, the title company, or the attorney’s office. Sometimes the escrow company takes care of all paper and the buyer and the seller may sign the papers separately.
Escrow agents are usually the ones who take care of the paperwork on the closing day.
9. Who Should Be There On Closing Day?
One thing that most home buyers are always curious about revolves around who exactly would be present during closing. The individuals required to be there when you close may vary from state to state. However, these people are usually present:
- Buyer’s co-borrower
- Seller. However, if the seller already signed the deed and transfer documents, then they don’t need to be present.
- Real estate agents for both the buyer and the seller
- Escrow or closing agent
- Attorney. Some states require an attorney to be present during closing. Sometimes, the attorney may also act as the closing agent.
- Title company representative
- Mortgage lender
10. When Can I Move In After Closing On A House?
As a new homeowner, you’re probably excited about moving in. Naturally, you want to know when you can actually bring your stuff over to the house you just purchased.
The contract you signed usually includes the move-in date. So, even before the closing day, you will know when you can move in. However, there are cases when the move in date gets pushed back. Of course, both parties should agree on these changes.
Theoretically, you can move in after the closing meeting if your contract says so. In situations like this, the seller should have cleared the property prior to the closing day.
Sometimes, the seller may need more time to look for a new residence. So, the seller may ask you for more time to move out. If you are willing, you may allow the seller to say after closing and charge rent for staying in the property. This arrangement is called a rent-back agreement.
Bring Your “A” Game On Closing Day
Receiving the keys to your new property is the culmination of all your efforts. But before you become the proud owner of the house, you need to go through the monotonous closing day process.
No matter how excited you are to be the new homeowner, take your time. Don’t sign everything with haste —it’s perfectly acceptable to read everything carefully before you sign.
The closing day marks the start of your journey as a new home owner. So, before you commit to buying a property, you want to make sure that you’re not getting the short end of the stick.