By Christina Kass
You’ve planned, researched and budgeted, and now it’s time for the long-awaited final step in the home-buying process—closing on your home. While you likely expect a closing to include documents, signatures and fees, you may not be aware of all the ingredients required for a smooth, successful closing. At Vanguard Title, we’ve helped thousands of homebuyers close on their new homes. We also take pride in keeping you informed and updated throughout the entire process, so there are no surprises on closing day. Read on to learn what a closing entails and how you can make the most of this milestone event.
What is a home closing and why is it important?
A home closing is the last chapter in the months-long process of buying a home. Simply put, a closing is the process by which you finalize all the details of your real estate transaction. The three most significant events that occur during a closing are:
- Your home’s title is transferred from the seller to you and you get the keys!
- The proceeds of the sale are distributed to the seller.
- If your home is financed, the mortgage note is signed.
As the buyer, your primary concerns will be the agreement between you and your lender regarding the terms and conditions of the mortgage, and the agreement between you and the seller transferring ownership of the property.
What can you expect the day you close on a home?
There’s no question that a significant portion of your closing will be dedicated to reviewing and signing your closing documents. However, you’ll also need to pay your down payment and closing costs, show proof of homeowner’s insurance and set up an escrow account. The main items you’ll review and sign during closing include:
- The promissory note – States your promise to repay the mortgage, and includes when you’ll make your payments and where you’ll send them
- A mortgage or deed of trust – Secures the note and puts a lien on your property as collateral for your loan
- The closing disclosure – An itemized list of your final credits and charges (you should receive this form at least three days before closing)
- Initial escrow statement – Contains any payments the lender will pay from your escrow account during your mortgage’s first year
It’s important to read all closing documents carefully before heading to the closing so you can ask for clarification from your loan officer or real estate agent if there’s anything you don’t understand. Once you are at the closing table you should be ready to sign.
Who will be present at your closing?
You may be surprised by the number of people who join you at your closing, but the complex nature of real estate transactions requires several parties. You will meet with your closing agent who is a representative from the title insurance company and also the person that will be notarizing your documents as the official witness. Others who may be present include your loan officer, real estate professionals, and sometimes the seller. The closing agent will conduct the meeting and ensure that all documents are signed and recorded and that all fees are paid and properly distributed.
What should you know about costs associated with closing on a home?
Prior to becoming the legal owner of your new home, you’ll need to pay closing costs. Lenders are required to provide you with an estimate of your closing costs well in advance of closing day, but they typically amount to 2 to 5 percent of your mortgage loan. These expenses include an origination, underwriting, appraisal, credit-report and title insurance premium. All of these fees will be added to your final amount due at closing, minus the earnest money deposit and application fees you paid up front. In addition, closing day is when you’ll pay your down payment, plus any prepaid interest, taxes and insurance. You’ll want to obtain a certified/cashier’s check payable or set up a wire transfer of funds to the banking institution of the title company. Be sure to have at least one form of government-issued photo identification on hand.
Does the timing of your closing matter?
While there’s no one-size-fits-all approach to choosing a closing date, scheduling your closing toward the end of the month can lower your closing costs. That’s because mortgage interest accrues from the date of closing through the last day of the month. An end-of-the-month closing also means you can get a head start on paying down your mortgage balance, since you can start making your payments sooner. The time it takes to close, if you have all your questions answered ahead of time, is generally about an hour.
How soon can you close on your home?
According to mortgage software company Ellie Mae, the average time it takes for homebuyers to close on a home purchase is 47 days. Most closings are scheduled for a period of 15, 30, 45 or 60 days after a signed purchase contract. To help you close sooner, it’s a good idea to apply for a mortgage preapproval before you start shopping for a home. That way, you can begin the verification process ahead of time. Reviewing your closing documents prior to the closing can also speed up the process.
Is there an alternative to in-person closings?
Traditionally, closings have almost always been held at the office of a title company, real estate agency, attorney or lender. Recognizing that life doesn’t stop when it’s time for your closing, Vanguard Title is pleased to offer the convenience of Closing Anytime Anywhere with the option to eSign — the electronic signing and notarization of your closing documents (lender approval is required). You’ll receive a link to the online portal on the day of closing to begin your eSign session with the closing agent and notary.
Your closing is complete. Now what?
No matter what type of closing you prefer, you officially become the legal owner of your home when the closing is complete and fully disbursed. On closing day, your loan becomes final and, shortly thereafter, you’ll receive what you’ve been waiting for — the keys to your new residence! While you’ll be eager to move in, be sure to schedule your first (or next) mortgage payment and store your closing documents in a safe place. Although there are many components to the closing process, Vanguard Title is here to make sure everything goes as planned and minimize any confusion that may arise, so you can focus on making the home of your dreams the home that you own.
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Know Before You Close
Closings are complex, but we’re here to help. To ensure your closing is smooth and successful from start to finish, we have created a quick checklist to down load.