You have arrived at Step # 7 of the home buying process – Closing Day. Your final step towards homeownership!
Remember the song “Closing Time” by Semisonic?
What about “End of The Road” by Boyz II Men?
What celebration song is on your playlist for your house warming party!
If you’re here, then you’ve found a home, negotiated the sale, and are ready to move in — and on. But before you can make this official (and get the keys!), you still have a few items to cross off your list.
Here is everything you need to know to have a successful settlement.
The Home Buying Process Step # 7 Settlement Date
Closing, or “settlement,” is when both parties (buyers/ Sellers) sign the final ownership and insurance paperwork.
This is the moment you have been dreaming of.
The moment when all of your hard work pays off…
Now you will become the legal owner of the home you picked out.
- The Home Buying Process Step 1 – Speaking To A Mortgage Loan Originator
- The Home Buying Process Step 2 – The Mortgage Loan Application
- The Home Buying Process Step 3 — Pre – Qualification
- The Home Buying Process Step 4 – The Property Search
- The Home Buying Process Step 5 – Contract Ratification
- The Home Buying Process Step 6 – Underwriting
How To Buy A Home Explained
Typically, settlement takes place about 30-45 days after you signed the purchase and sale agreement.
During this time, your Earnest Money Deposit (EMD) is held in escrow until all contingencies, like the home inspection contingency and appraisal contingency, have been met.
Your agent will be able to answer questions and offer support through closing.
Buying A Home What To Expect At Settlement
Before You Close, You’ll Have a Final Walk-Through.
Most sales contracts give you one last chance to do a walk-through of the home within 24 hours of settlement.
This is your chance to check that the property is in good condition and to make sure any agreed-upon repairs have been completed.
In most cases, no problems arise at this stage of the transaction. (If something is amiss, your agent can walk you through it.)
The final walk-through mostly gives you peace of mind knowing that you and the seller, have adhered to the conditions of the sales contract and home inspection-related repairs.
Home Buying Process – Follow These Steps to Prepare for the Final Walk-Through
To help ensure that the walk-through goes smoothly, answer these 6 settlement questions to make sure you are prepared.
Question #1: Is the house clean?
Your new home should be spotless for the final walk-through. Assuming you are taking ownership on the day of closing.
The sellers should be fully moved out at this point. But moving can be messy.
After purging, packing, and moving, the sellers may want to do one more deep cleaning.
Make sure you have not been left a big mess!
Question #2: Do you have the owner’s manuals and warranties.
Make sure you have been given all manuals and warranties needed for home appliances.
Ask for physical copies and put these documents in one place with your settlement paperwork. If receipts from contractors for repairs are required, make sure to store them with the manuals.
Steps To Homeownership Revealed
Question #3: Are there preferred vendors?
Ask the seller about contact information for home contractors or maintenance companies that they’ve used in the past. These vendors are familiar with your home, and having a list of servicers you can trust will make it easy for you to take good care of your new home.
Question #4: Did sellers leave anything behind?
Do one more check throughout the home to make sure the seller is not leaving anything behind. One exception: You may want to ask for any unused or leftover paint cans in the colors currently in use within the home — but confirm with the seller first.
Question #5: Are the water valves off?
The last thing you want before closing is a flood. With your permission, the sellers have probably turned off your house’s main shutoff valve 24 hours before closing.
Question #6: Did you lock the door after your walkthrough?
Until settlement is complete, the seller is legally responsible for the home — meaning they’d be liable if there’s a break-in before closing.
So, the day before settlement make sure to close window coverings and lock the entry doors. If a house looks un-lived in, it’s a welcome sign to burglars. It’s a good idea to leave a porch light on or to set an interior light to turn on and off with a timer.
If the final walk-through reveals an issue with the house, don’t panic.
The standard protocol is for your agent to immediately alert the listing agent that there’s a problem. Then, both parties work together to solve it. Typically, either the closing gets delayed or there’s additional negotiation, such as monetary deduction of the sales price.
In other words: There are options, and your agent can help you through this.
Buying A Home: The “Closing Disclosure”
Let’s assume the final walk-through is smooth sailing. (Woo-hoo!) What happens next?
You’ll get info about your closing costs from your loan officer as well as the title company.
Meanwhile, your mortgage lender must provide you with a Closing Disclosure, or CD, three business days before settlement.
This is a formal statement of your final loan terms and closing costs.
The Home Buying Process – Expect to See These People at the Closing
Settlement typically takes place at the title company, attorney’s office, or the buyer’s or seller’s agent’s real estate office. (Unless you live in a state that allows for electronic closings — eClosings — with remote notaries. In that case, the involved parties can opt to sign documents digitally.)
The list of legally mandated attendees will depend on your state, but usually, you’ll be joined by:
- Your agent
- A title company representative
- The loan officer
- Any real estate attorneys involved with the transaction
Buying A Home – Remember to Budget for Closing Costs
Closing costs can vary widely by location, but you’ll generally pay closing costs of 3% – 4% of the home’s sales price.
So, on a $300,000 home, you can expect to pay anywhere from $9,000 to $12,000 in closing costs.
Closing costs for buyers typically include:
- Transfer taxes or recording fees
- Escrow accounts
- Homeowner association dues included up to the settlement date
- Prorated property taxes
- Escrow, title, or attorney fees
- Hazard insurance
- Lenders and/or owners title insurance
- Points to buy down the rate
- Appraisal fee
- Credit report fee
- Underwriting fee
- Processing fee
Buying Your First Home – What to Bring to Closing
At the closing you should have:
- A government-issued photo ID
- A copy of the ratified sales contract
- A cashier’s check, or proof of wire transfer, if your closing costs are not being deducted from the sales price.
(Yes, it’s OK to use a cashier’s check — especially if you don’t want to deal with the hassle of a wire transfer, which can take time to clear. With a cashier’s check, you’re guaranteed the money you need for settlement will be there at closing.)
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Rod Ferrier is a licensed loan originator in Virginia and Maryland.
A U.S. Navy Veteran, father of four, he began his career as a loan officer in 2002.
He specializes in assisting his clients to navigate the home buying process towards homeownership.
His clients include Veterans, first time home buyers, families looking to purchase a bigger home, as well as empty-nesters seeking to downsize.
Rod’s background in financial planning provides his clients with the opportunity to benefit from the wealth created by strategically purchasing the right home.