How to close on a home
Close on a home (and next steps)
After weeks or even months of searching through home listings and negotiating prices, a seller accepts your offer, and you’re already thinking of ways to decorate your new home.
Not so fast! You still have a few more steps to take before you can walk away with the keys to your new home. Proper preparation can help ensure the home closing process goes as smoothly as possible, especially if you’re a first-time homebuyer and are unfamiliar with how it goes.
Here’s what you need to know to ensure your closing process goes smoothly.
Note 1: What does it mean to close on a home?
Closing is the final step in the homebuying process. So, what do you need to do to make this happen? After the seller accepts your offer, you can expect to wait weeks or months before your actual closing date. Even if you and the seller immediately agree on a closing date, your agents will likely work with your lender to settle on a time that allows them to complete closing requirements on their end.
Note 2: How to prepare
Note 3: Problems that can cause closing delays
When closing a home, it’s relatively common to encounter some delay that can bring the process to a temporary halt. These delays can crop up anytime, including on your closing date. Some common issues include:
Note 4: What is an escrow account?
An escrow account is when you set up an account with a lender or mortgage servicer to pay your property taxes and insurance. If you plan on creating an escrow account, finalizing your arrangements will happen during the closing process. Some benefits of having an escrow account are knowing your bills will be paid in full and on time, meaning you won’t have to worry about budgeting these large payments separately.
So, how does this work? You’ll pay a portion of your insurance premium and annual taxes each month as part of your monthly mortgage payment. When your insurance payments and taxes are due, they will be paid with the funds from your escrow account. You’ll receive an annual escrow analysis alerting you to any surpluses or shortages. If you have surpluses, you’ll get your money back — if there are any shortages, you’ll have to repay the difference.
Some reasons there could be a shortage include:
- Increase in insurance premiums and property taxes
- Insurance carrier changes
- Changing due dates
- Tax adjustments
- Fewer escrow deposits
It’s important to note that if your escrow payment changes due to any surpluses or shortages, your monthly escrow payments will vary. This means that even if you have a fixed-rate loan, your monthly payments will be subject to change.
Note 5: How much does it cost to close on a home?
To prepare for closing day, you’ll need to know how much you’ll have to pay out in closing costs. Closing costs usually include the premium for homeowners insurance, home inspection costs, appraisal fees, attorney fees and more. You can expect to pay around 3-4% of the purchase price of the home in closing fees, so be sure to budget for this.
Note 6: What happens on closing day?
On closing day, you’ll pay any outstanding fees or remaining closing costs as listed in your Closing Disclosure. The seller will sign paperwork to document the transfer of property ownership. You’ll then be required to sign a settlement statement with all listed fees relating to the home sale, a mortgage loan agreement and a deed of trust securing the mortgage loan. The title company will need to register the new deed in your name.
You should bring:
- Photo ID
- Outstanding paperwork for the mortgage loan office or title company
- Cashier’s check for the title or closing company
Note 7: Where does closing take place?
On closing day, you’ll likely meet at your escrow office. The escrow company will probably be the title company that formally secures your ownership of the new property. Typically, you’ll need the seller, escrow agent, mortgage lender and real estate agents to be present on closing day. Talk to your real estate agent to see who all needs to be present when closing your home.
Note 8: When can you move into your new home?
You may be able to get settled into your new home following your closing appointment depending on whether or not the seller has requested a delayed move-in date. Your move-in date should have been pre-determined in your closing contract, but you can always talk to the seller or your real estate agent if you have any additional questions.
Buying and ultimately closing on a new home is an exciting time that can be overwhelming if you don’t have the help of the right people. The knowledgeable team at Chase can help make the homebuying process go smoothly so you can focus on making your new house a home.