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
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.
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?
Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice.