March 30th, 2020 12:13 PM by Jackie A. Graves, President
Closing on a house marks the beginning of a new lifestyle for
homeowners since ownership of the home is transferred. Here’s what to expect at
the closing and how long it takes to close on a house.
What are closing costs?
Closing costs are the fees and expenses that the homeowner must
pay before he/she becomes the legal owner of the house, condo or townhome.
Expect to pay 2 percent to 5 percent of the mortgage loan in closing costs.
Fees vary in each state and some have additional ones.
The closing costs include setting up escrow accounts to paying
for a title search appraisal and checking a consumer’s credit history. Whether
you are purchasing a new home or refinancing a mortgage to receive a home
equity line of credit or home equity loan, closing costs need to be paid.
a software company that processes mortgage applications, reports that the
average time it takes for homebuyers to close on their home purchase was 47
days as of October 2019.
Closing on a house can be a lengthy process and planning is
crucial, especially if you are currently renting a home or an apartment and
your lease is almost up.
A closing usually takes 30 to 60 days, but a number of factors
can change this timeline. Renters should aim to close toward the middle to end
of the month, says Jared Maxwell, vice president of consumer direct lending at
Embrace Home Loans in Middletown, Rhode Island.
“This will help prevent paying your final month of rent for an
apartment or house you aren’t using,” he says.
On the flip side, the closing date would also depend on how
quickly the seller can move out of the home, so the buyer may be in a hurry, but
the seller may have a different timetable.
A rule of thumb is to expect at least 30 days to closing because
it gives the buyer and the lender an opportunity to complete all the paperwork.
“There are certainly instances where lenders can close in as fast
as 15 to 20 days, but this assumes documents are returned quickly and there are
no unforeseen hurdles that occur with the condition of the home or the title
report,” Maxwell says.
Applying for a loan preapproval before you start shopping for a
home can help people close sooner since a few of the verification processes
will be completed ahead of time, says John Schleck, a senior vice president in
consumer lending at Bank of America in Charlotte, N.C.
At closing, your participation will involve a couple of steps:
Funds are usually a cashier’s check made out to the escrow
company or a wire transfer funds to the banking institution.
Be sure to find out what type of identification is required.
Usually, only one type of identification is needed, though some companies
require two. Government-issued identification, such as driver’s licenses and
passports, are normally accepted.
Closing costs are typically
thousands of dollars and homeowners should plan on paying 2 percent to 5
percent of the mortgage loan. The costs can be rolled into the mortgage amount
(known as a no-closing cost
mortgage) or paid up front, and some components of closing costs can
These costs also vary by state. Some states and localities
charge mortgage and transfer taxes that increase the costs in that state,
Maxwell says. Lenders are required to provide an estimate of your closing costs
early in the loan process and closer to the closing date an amount you can
expect to bring to closing.
For example, the sale of a $200,000 home in Illinois means the
buyers will pay title fees that begin at $1,700, escrow fees at $1,500, survey
fees of $400 and attorney fees that average $400, says Neil Narut, senior
underwriting counsel for Proper Title, a Chicago-based title company. There are
many more items on top of that.
Homeowners can prepare for a closing to help speed the process.
Buyers should obtain beforehand all the documents that the loan officer
will request, Maxwell says.
“You should refrain from making any large undocumented deposits
such as cash deposits and opening any new credit card accounts,” he says.
Buyers will want to make sure nothing in their finances changes
before the closing day because the lender does make last-minute checks of vital
Closing procedures vary from state to state and even county to
county, but the following parties will generally be present at the closing or
The closing agent conducts the settlement meeting and makes sure
that all documents are signed and recorded and that closing fees and escrow
payments are paid and properly distributed.
Several things occur on the day you close. Prepare to spend a
few hours on this process.
The buyer will conduct a walkthrough with their realtor to
confirm the home is in the condition promised. Plan to obtain a certified check
from the bank that is made out to the title company for the closing costs and
the remainder of your down payment, Maxwell says.
There are three main documents to sign during closing, including
a deed of trust or mortgage, which is a document that puts a lien on your
property as collateral for your loan, Schleck says. The second document is the
promissory note, a legal agreement to pay the lender, including when you will
make your payments and where you will send them. The last one is the closing
disclosure, an itemized list of your final credits and charges
“The sellers will sign a few documents and you will receive the
keys to your new home,” Maxwell says.
Many factors can cause delays to the closing. One common item
that can cause a delay is if there is a repair that the appraiser believes
needs to be addressed, Maxwell says.
Another factor is a lien on the title that the seller is unaware
of that must be satisfied before the closing can take place. A homeowner can
cause the delay if he/she lacks some of the documents that the lender needs to
conduct the closing.
Delays beyond three months are rare, says Mike Tassone,
co-founder and COO of Own Up, a Boston-based mortgage company. The causes
include finding issues with obtaining a clean title to the home such as tax
liens, and previous owners unreleased from title as well as negotiations
related to appraisals that come in below the purchase price.
“Throughout the mortgage process, it’s important to complete
applications accurately and upload documents in a timely manner to ensure things
move smoothly,” Schleck says. “Depending on market activity, there may be some
delays as third-party providers such as appraisers tend to get very busy during
peak homebuying season.”
You will receive the following key documents:
The loan estimate. This document
contains important information about your loan, including terms, interest rate
and closing costs. Make sure all the information is correct, including the
spelling of your name.
The closing disclosure. Like the loan estimate, the
closing disclosure outlines details of your mortgage. You should receive this
form at least three days before closing. This window of time gives you a chance
to compare what’s on the loan estimate to the closing disclosure.
The initial escrow statement. This form contains
any payments the lender will pay from your escrow account during the first year
of your mortgage. These charges include taxes and insurance.
Mortgage note. This document states your promise to repay the mortgage.
It indicates the amount and terms of the loan and what the lender can do if you
fail to make payments.
Mortgage or deed of trust. This document
secures the note and gives your lender a claim against the home if you fail to
live up to the terms of the mortgage note.
Certificate of occupancy. If you are buying a newly
constructed house, you need this legal document to move in.
Once you’ve reviewed and signed all closing documents, the house
keys are yours and you will officially be a new homeowner.
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