As you plan to purchase your first home, you might find that there are a few stressful aspects of the homebuying process that can make or break your purchase: One is when you first apply for a mortgage and another is when you close on a house. However, following some simple guidance from your real estate team — including your real estate agent and mortgage lender — will help ensure a smooth transaction.
To begin, get preapproved for your mortgage. This is an important step that lets you know how much you can afford to spend on your new home. Plus, if you get approved by one lender — or, preferably, multiple lenders — you can breathe a sigh of relief and then choose the best deal offered. Conversely, if you make an offer on a property first and then choose your mortgage lender, you may find yourself stressed as you await approval.
Then, if all goes well, the underwriting process will begin and you can prepare for closing. At this point, as long as you are preapproved and nothing dramatically changes with your finances, you should be good to go. The final stage in closing on a home involves all of the paperwork: You’ll need to sign disclosures, disclaimers, and contracts before ownership of the home is transferred to you and you get the keys.
So, let’s take a look at what you need to know about closing:
How Long Does it Take to Close on a House?
A common question that many homebuyers ask is: How long does the process of closing on a house really take? There are actually two answers to this question: The first is the time between submitting a loan application and closing, and the other is actually signing all of the documents on the closing day itself.
How much time is there between submitting your mortgage application and closing day?
Typically, this part takes between 30 and 45 days, although it can take slightly longer depending on the type of financing used.
In 2021, closing times have stretched to 51 days for conventional loans. For FHA loans, this is even longer at 55 days, while VA loans are 57 days. And, refinancing tends to take even longer.
How long does it take to sign the documents on closing day?
If you have to sign loan documents in the presence of the relevant parties, you can spend an hour or even an hour and a half in the office. Some closings take place with the buyer and seller meeting with their attorney or closing agent. But, nowadays, the buyer and seller may not sign in the same location.
Closings can also be completed online or via mail, which can take more or less time.
What Happens During Closing?
During the actual closing process, you’re required to read through and sign legal documents. These documents from your lender will transfer the ownership of the property to you. In return, the seller will receive the proceeds of the loan from your lender. Specifically, the documents you need to sign at closing will include the following:
- Mortgage documents: Sometimes called a deed of trust, this allows the lender to begin foreclosure proceedings if you don’t adhere to the payment schedule.
- Promissory note: This is your promise to repay the loan value to the lender.
- Escrow: This disclosure explains the insurance and tax charges that are part of your monthly mortgage payments.
- Your right to cancel: This form allows you to back out of the deal within the following three business days.
These are just some of the documents you’ll have to sign on closing day. You can also expect other disclosures, disclaimers, and government documents to read through and sign. Additionally, there will be standard documents that all lenders have buyers sign, along with a few that may differ by lender.
Meanwhile, if you’re buying, you’ll immediately notice a disparate difference between the number of documents that you have to sign compared to a seller — sellers have only a few documents to sign and can then be on their way.
What Do Buyers Have to Pay at Closing?
Three days prior to closing on a home, you should receive your closing disclosure, which will outline what you need to pay. This should also have been explained in the loan estimate when you applied for the mortgage. In particular, expect to pay the following charges at closing:
- Prorated property taxes
- Lender origination fees
- Third-party fees
- Interest due before your first mortgage payment
- Title insurance
- HOA fees, if applicable
What Do You Need to Take to Closing?
Check with your lender, real estate attorney or closing agent for exactly what you should bring to closing, but you’ll likely need to have the following:
- Identification, such as your driver’s license
- Closing disclosure to compare against the documents you have to sign
- Cashier’s check for what you are expected to pay at closing. If you’ve already paid via wire transfer, bring a receipt. Lenders will not accept a personal check for obvious reasons.
Closing day is the culmination of the long process to take possession of your dream home. Fortunately, by following sound guidance from professionals throughout the transaction, the closing will go off without a hitch.
Then, when you’re done signing, all that will be left will be to start unloading the moving truck you rented. This is where the fun begins — as you set up shop and start building lasting memories.