Closing on a Home: What to Expect

Closing on a home is the final step to becoming a homeowner. It’s an exciting time, but it’s not without its challenges.

Before the seller can transfer property ownership to you, you’ll need to complete several other steps — like getting an appraisal and setting up homeowner’s insurance. You’ll also need to sign a lot of paperwork and pay any closing fees before getting the keys.

The entire closing process can be lengthy and costly. But with a little preparation, you’ll be ready to finalize the transaction and become a proud homeowner with minimal hassle.

Here’s what you can expect as you embark on the closing process.

Closing on a home: Step-by-step guide

Before you can buy a home, you’ll need to complete the closing process. While it can seem complicated, following these steps will help streamline the transaction and ensure it goes smoothly:

1. Reach out to a mortgage closing services company: Choose a company to handle the closing process and find out what you can expect before the closing date. The process might vary depending on where you live, so knowing this ahead of time can prevent unnecessary confusion or stress.
2. Get an appraisal, inspection, and title search done: You’ll need to get a home appraisal before securing financing. Your lender must give you the results of the appraisal at least three business days before closing. You should also get an inspection and title search before closing on the home.
3. Get your closing documents: You’ll receive several closing documents, such as a loan estimate, a promissory note, the property deed, and other contractual documents. You should also receive a closing disclosure at least three days before the scheduled closing date. Review the disclosure and compare it to the loan estimate to ensure the terms, projected monthly payments, and other details match. If you have any questions or concerns, reach out to your lender.
4. Find out who’s coming: Several different people will be involved on the final closing date, including attorneys, real estate agents, an escrow officer, and a closing agent. Some people will be required to be present at closing, while others will not. You might also want to have a witness or your co-borrower there.
5. Get your funds together: You'll need to pay certain costs — like a down payment and closing fees — before closing on a home. You might be able to bring a cashier’s check or schedule a wire transfer ahead of time to cover these fees. The seller might pay certain closing fees as well.
6. Negotiate closing costs: Determine who pays the closing costs on a home, and what they are. See if any common costs — like origination fees or application fees — are negotiable.
7. Set up insurance and taxes: You'll need to get homeowner's insurance before receiving a mortgage loan. You might also be required to have an escrow account, which will include your property taxes and insurance payments.
8. Review the closing documents: Look over your documents one last time before signing anything. Take some time to ask any final questions you might have. If everything is in order, sign on the dotted lines. Depending on the document, you might need to get your signature notarized.
9. Transfer property ownership: Once you’ve signed everything and any final payments go through, you’ll receive the keys. An official party — like the closing company or your attorney — will also submit the transfer of ownership documents to your county registrar’s office.

What documents do you need when closing on a home?

When closing on a house, you’ll need several key documents, including:

• Promissory note: This is a legal document that indicates your agreement to pay back your mortgage loan. It should include the details of the loan, such as the loan amount, interest rate, repayment term, and payment due dates. It will also indicate the consequences of not paying back what you owe.
• Mortgage: Also called a Security Instrument or Deed of Trust, this document allows the lender to seize your property if you don’t pay back the loan based on the terms of your agreement. It also indicates your rights as a borrower.
• Initial Escrow Disclosure Statement: This document breaks down how much you must pay every month into an escrow account. This amount could change over time, however.
• Loan estimate: You should receive this document before closing on a house but after submitting your formal loan application. It breaks down important information about your loan, such as the estimated monthly payment, closing costs, interest rate, taxes, and insurance. It also includes details about prepayment penalties, if any.
• Closing disclosure: Your lender must give you this document at least three days before you officially close on the mortgage loan. It contains the final details about your loan with all of the projected payments and fees. The information might be different from what was in the loan estimate, so compare them carefully.
• Right to Cancel form: This form gives you up to three business days after closing on a loan to cancel it. It’s usually reserved for mortgage refinancing.
• Homeowners insurance: You’ll typically need to have proof of homeowners insurance before you can get a loan and finalize the closing process.
• Additional documents: Your lender, state government, or local government might require additional documents. Ask about these before the closing date so you know what to expect.

How much does it cost to close on a home?

Now that you know the general steps of closing on a home, the next question is: How much is a closing cost on a home?

The average closing cost on a home is between 3% and 4% of the home purchase price. However, closing costs vary based on several factors, such as the home value, lender, home loan program, and down payment amount.

Property location plays an important role, too. States where properties are generally cheaper tend to have lower closing costs, and vice versa.

For example, Washington, D.C., had the highest average closing cost in 2021 at $29,888. On the other end of the spectrum, Missouri had the lowest average closing cost at $2,061.

Keep in mind that closing costs tend to increase with rising interest rates and property prices. From 2021 to 2022, average closing costs increased by 22%.

If your closing costs are too high, you might be able to lower them by using lender credits, or points. The trade-off is that you’ll typically need to pay a higher interest rate.

How long does it take to close on a home?

Closing on a house typically takes several weeks or more. According to an ICE Mortgage Technology report, the typical time to close on a home was 45 days.

Although some parts of the process might take longer than others, you might be able to speed up the closing process by:

• Working with a reliable mortgage lender with a history of fast closing times
• Responding to any and all lender requests for information promptly
• Completing all or part of the closing process digitally
• Paying for the property in cash to avoid the need for a lender
• Preparing your mortgage closing documents ahead of time
• Shopping for certain services — like a title search company or homeowners insurance — in advance based on your loan estimate
• Scheduling a home inspection early to uncover any hidden issues

Certain factors can also slow down the closing process, such as:

• Inspection issues: If the inspection reveals any major problems with the home that the seller needs to address, this can also cause delays.
• Title issues: If you can't get a clear title, or if there's a lien on the property, the entire purchase process might come to a stop.
• Financing issues: If you can't get a loan, or if the lender requires more documents, it could delay the process.
• Appraisal issues: The appraisal determines the fair market value of a property. If the seller is asking for more than the property is worth, the lender might refuse to give you a loan.
• Closing disclosure issues: If your closing disclosure has any errors on it, even if it's a misspelling, this could slow down the entire process.

Tips to close on time (and what to avoid)

If you want to avoid unexpected delays when purchasing a home, here are some things you should do:

• Respond to any lender requests as soon as possible.
• Be proactive in the closing process.
• Get your paperwork, documents, and funds ready.
• Schedule your title search and inspection early.
• Find homeowner’s insurance early.
• Figure out what the closing costs are and prepare for those.
• Review your closing disclosure for errors and get them fixed ahead of the scheduled closing date.

Here are some things you should not do:

• Request major last-minute concessions from the seller as this can delay the process.
• Make significant changes to your finances (e.g., apply for new loans or quit your job).
• Do anything that might significantly affect your credit.
• Move your money around suddenly.

Closing on a home FAQ

Is there anything I can do to speed up closing on a house?

If you want to close on a home faster, start by finding a good home lender with a streamlined lending process. Find out who’s sending you the closing disclosure and get your documents ready. You should also avoid making major financial decisions that could cause delays.

What should I do before closing?

Before closing on your new home, review any closing documents — especially your loan estimate and closing disclosure — and make sure everything is in order. Get your funds together so that you have the money when the time comes to pay the closing fees and the down payment.

What happens if the buyer changes their mind during closing?

A buyer can back out of a home purchase, but there may be consequences. For example, a buyer who puts down earnest money could lose that money if they change their mind during the closing process. The exception to this is if they back out due to a permissible reason — like an inability to get a loan or if certain contingencies haven’t been met.

When do I get the keys to the house?

You’ll need to sign everything and pay any closing costs to receive the keys. You may also need to wait until the Register of Deeds records the transfer of property ownership.

What do I need to do after closing?

After closing, put your closing documents somewhere safe in case you ever need them in the future. Update your address with all of the appropriate companies or authorities — like your bank, US Postal Service, and DMV. Change the locks on your new home, set up utilities, and look over your homeowners insurance. Last but not least, review your budget and start making payments on your new loan.