As a first-time homebuyer, you might have a vague idea of what closing day on a house entails. Most people in your position prime themselves for more paperwork, ready to sign a few more documents before they finally move into their new place. Beyond that, the rest of the process is unclear, something to sort out later.
Of course, it’s smart to prepare yourself for the realities of real estate closing, because it isn’t as simple as some people think. In truth, new homeowners need to manage a number of different tasks to complete the transaction. Closing day on a house is rarely calm for those who neglect to research their responsibilities.
So what do these responsibilities include? If you’re creeping closer and closer to closing day, what should you anticipate, and how should you prepare? We’ll walk you through everything you should know about the process, detailing the most important points to guide you in the right direction, away from common mistakes.
What Should You Bring?
As mentioned earlier, most people in your position prime themselves for paperwork. This is perfectly reasonable, as the closing process involves a number of different documents which you’ll need to review before the transaction is complete. As you prepare to visit the closing agent’s office, collect the following.
- Photo ID: The closing agent needs your photo ID for the purpose of verification. You can choose to give them your driver’s license or current passport.
- Cashier’s or certified check: This covers any down payment and closing costs. Do not bring a personal check or cash.
- Proof of insurance: Evidence that you have the insurance in effect on closing day, with a receipt showing you paid the policy for a year.
- Final purchase and sales contract: A precautionary measure to double-check any details against the closing costs.
Once you secure the items above, you can move forward with the rest of the process. Of course, you might not require a cashier’s or certified check if you choose to wire the funds, and the agent might have collected your proof of insurance prior to the meeting — but these are general documents to keep in mind.
What Will You Have to Answer?
The primary question you’ll have to answer is — How do you intend to take the title of the home? You have several options, and your answer will ultimately depend on whether you involve other people in the purchase. If you’re the sole owner, you take the title in your own name, and you’re more or less finished.
However, if you’re buying the house with another person, like your partner, you enter a joint tenancy. You can also buy a home with another person as “tenants-in-common,” a term which clarifies that you and the other party may have unequal shares of the property. It’s best to work out these details in advance, so the real estate closing process goes as quickly as possible.
What Will You Have to Sign?
Depending on your set of circumstances, you may need to sign your name upwards of twenty times. The documents will vary based on where you’ve chosen to live and the specifics of the property, but you should anticipate the following paperwork, as it’s the most common.
- Closing disclosure: A multi-page form which itemizes the buyer’s and seller’s closing costs. You’re entitled to receive it three days before your meeting.
- Warranty deed or title: It transfers the title from the seller to the buyer, containing the legal description of the property you’ve purchased.
- Proration papers: An agreement which explains how the buyer and seller are splitting various home-related expenses for the month of the transaction.
- Declaration of Reports: An acknowledgment that the buyer has witnessed and signed off on all inspection and survey reports.
- Statement of Information: Also known as the “Statement of Identity,” it distinguishes between you and anyone with a similar name.
- Abstract of Title: It lists all the recorded documents affecting the title to the property.
As for the documents related to closing your mortgage, they’re separate from the paperwork above. Regardless, they’re just as crucial to consider.
- Truth in lending statement: A paper which shows your interest rate, annual percentage rate and other details of your mortgage.
- Promissory note: A document outlining the terms of the loan, which you effectively “promise” to pay back, hence the name.
- Mortgage or deed of trust: The lender puts a lien on the property, positioning your new home as security for the debt you owe.
- Monthly payment letter: A break down of your monthly mortgage payment, including interest, taxes, etc.
Moving forward, make sure to check and double-check every document before you give it your signature. It’s an important precaution, regardless of your situation. After you answer the requisite questions and complete the necessary paperwork, you’ll probably feel eager to finish the process.
When Is the Home Finally Yours?
Most homebuyers spend at least two hours at the closing agent’s office, which seems like a lot. When you consider all of the documents above, as well as the questions or concerns you might have, a two-hour estimate makes sense. Just set aside some time to eat beforehand, and you’ll feel far less anxious.
Once you sign the documents, review the contracts and pay your lender, you’re pretty much there. Your closing agent will let you know when you’re free to move forward. But as a general warning, it’s best not to rush, and you should give any unexpected closing day surprises the proper attention.
Closing Day on a House
You now have an informed understanding of the real estate closing process and everything it entails. As you continue, you can feel confident and capable of handling what’s ahead. While closing day on a house might challenge an unprepared homebuyer, you’ve done your research, and you’re ready.
Most of all, congratulations on your new home! Find time to celebrate, because you deserve to. Now, it’s time to start gathering supplies for your new home and planning a housewarming party to end all housewarming parties.