What happens at closing?
When you purchase or refinance a home, the last step in the process is called the closing. This is when you finalize all the details of the transaction. It’s a good idea to review what happens ahead of time so you know what to expect.
What you do at closing
You’ve made it through the application process, and have a closing date. At your mortgage closing, you meet with various legal representatives to sign your mortgage and other documents, make any required payments and receive the keys to your new property. Track your mortgage application progress using Bank of America’s Home Loan Navigator®.
Your closing will likely be held at the office of the title company, an attorney or the lender. You’ll want to bring copies of any paperwork you received or signed throughout the homebuying process, as well as two forms of ID and the payments you will make. Here’s what happens during the closing:
- You review and sign all your loan documents. Make sure you understand the terms of each document. If something is different from what you expected or agreed to, don’t sign until you resolve the issue.
- You provide documentation of homeowners insurance and inspections (if applicable).
- You give a certified or cashier’s check to cover the down payment (if applicable), closing costs, prepaid interest, taxes and insurance. You could also send these funds in advance via wire transfer.
- Your lender distributes the funds covering your home loan amount to the closing agent.
- Depending on your loan terms, you may also be required to set up an escrow (or impound) account to cover property taxes and homeowners insurance, in addition to your monthly mortgage payment.
Knowing what’s expected of you and understanding key homebuying terms can make the process smoother.
What you sign at closing
There are three main items to review and sign during closing:
A deed of trust or mortgage
This document puts a lien on your property as collateral for your loan.
The promissory note
A legal agreement to pay the lender, including when you will make your payments and where you will send them.
A Closing Disclosure
An itemized list of your final credits and charges, based on the terms of the contract.
Homeowner tip: Don’t sign your Closing Disclosure if it’s significantly higher than your Loan Estimate or if you see a different rate on your loan than you agreed to. In many cases it’s easy to resolve such discrepancies, but be sure you’re satisfied and understand your loan terms before signing.
What you pay at closing
Along with any down payment or other prepayments related to your home purchase, you’ll likely pay closing costs, which usually total between 3 and 5 percent of the loan amount. You can use the closing costs calculator from Bank of America to estimate what your costs might be.
You should first get a sense of how much your closing costs will be from the Loan Estimate your lender provides you within three days of submitting your mortgage application. When your loan is approved, and at least three days before closing, you receive a Closing Disclosure, which lists your finalized closing costs.
You may pay some fees noted in your Loan Estimate and Closing Disclosure before closing, such as those associated with credit reports. For the rest, ask your closing agent what payment methods are acceptable.
Who else attends your closing?
The number of people at your closing depends on many factors, including the property’s location, the property type and the nature of the sale, such as an all-cash purchase versus a traditional mortgage. Here’s who might be present:
- Your attorney (if you have one)
- A lender’s representative
- Your real estate professional
- The closing agent (usually a title company representative)
- The seller’s attorney (if they have one)
- The seller’s representative
- The seller’s real estate professional
- A notary public
How long does it take to close on a house?
Closing day typically happens four to six weeks after you sign the sales and purchase contract, though it may take longer. The closing process itself may take several hours.
Once all the papers are signed, you’ve secured your mortgage and the closing is officially complete, you’ll receive the keys to the property. Be sure to store all of the documents you received during the closing in a safe place. You can also now change your address, meet your new neighbors and move in.
Avoid closing glitches
- Check documents for errors.
- Allow enough time for money transfers and for the loan to close.
- Handle home repairs in advance.
- Make sure the title is clear.
- Don’t make significant changes to your finances, such as buying a car or opening a new credit card, before you close.
Move-in to first payment
You’ve come a long way, but once you’ve closed and moved, you still have a little more planning to do. During this period, about 15 days after close, it’s really important to understand how to make your first mortgage payment on time.
Depending on your loan, you may have made a one-month mortgage payment during your closing, and learned when to make your next payment. You probably also learned about the option to set up automatic ACH mortgage payments at closing (so named for the Automatic Clearing House Network that processes the payments). One of the digital choices for paying your mortgage, ACH payments are automatically withdrawn from your bank account. It’s one way to make sure you’re never late on a mortgage payment. You can choose the date the payment will come out of your account each month, and you can set up mobile and online alerts so you have no surprises as you make your house into a home.
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