Closing process explained
What happens during the closing process when buying a home?
Projekt-Plan
Why: Most rental agreements require a 3-month notice period, making this the critical first step to avoid double-paying rent and mortgage.
How:
- Review your current lease for the specific 'Notice Period' clause.
- Draft a formal written notice including your move-out date.
- Send it via certified mail or hand-deliver it with a signed receipt.
Done when: [Landlord has confirmed receipt of the termination notice in writing]
Why: In many regions, an attorney is legally required to review the contract, perform title searches, and oversee the transfer of funds.
How:
- Look for a specialist in residential real estate law.
- Verify they are licensed in your specific state or province.
- Confirm their flat fee for closing services (typically $800–$1,500).
Done when: [Engagement letter is signed and the attorney has the purchase contract]
Why: Closing costs typically range from 2% to 5% of the home's purchase price and must be paid in liquid funds.
How:
- Calculate 5% of your purchase price as a 'worst-case' buffer.
- Include line items for: loan origination, title insurance, appraisal, and government recording fees.
- Move these funds into a high-yield savings account for easy access.
Done when: [Total estimated closing amount is liquid and available in your bank account]
Why: This identifies hidden defects (mold, structural issues, electrical) that could cost thousands later or serve as negotiation leverage.
How:
- Hire a certified inspector (e.g., ASHI or InterNACHI certified).
- Ensure they check the roof, HVAC, plumbing, and foundation.
- Attend the inspection personally to ask questions about maintenance.
Done when: [A full written inspection report is received]
Why: If the inspection reveals major issues, you must decide whether the seller fixes them or gives you a price reduction.
How:
- Focus on 'Big Three' issues: Safety, Structural, and Systems (HVAC/Roof).
- Request 'Seller Credits' instead of repairs to ensure you control the quality of the work later.
- Have your attorney draft the 'Repair Addendum'.
Done when: [Both parties have signed the repair addendum or price adjustment]
Why: The lender will not loan more than the home is worth; if the appraisal comes in low, you must bridge the gap or renegotiate.
How:
- Your lender will order this automatically, but you must pay the fee (approx. $400–$600).
- Ensure the appraiser has access to the property via the listing agent.
- Review the 'Appraised Value' against your 'Purchase Price'.
Done when: [Lender confirms the appraisal meets or exceeds the purchase price]
Why: Lenders will not fund the loan without proof of insurance starting on the day of closing.
How:
- Get quotes for 'Replacement Cost' coverage, not just 'Market Value'.
- Ensure the policy includes 'Lender's Loss Payable' clause with your bank's info.
- Send the 'Evidence of Insurance' (EOI) to your loan officer.
Done when: [Insurance binder is delivered to the lender]
Why: This ensures no one else has a claim to the property (liens, unpaid taxes, or easements).
How:
- Have your attorney check for 'Clouded Titles' or old mortgages not discharged.
- Verify the legal description matches the survey.
- Purchase 'Owner’s Title Insurance' to protect yourself from future claims.
Done when: [Title is confirmed as 'Clear' or 'Marketable']
Why: By law, you must receive this 3 days before closing to compare final costs with your initial Loan Estimate.
How:
- Compare the 'Final' vs. 'Estimated' loan costs.
- Check the interest rate and loan term one last time.
- Confirm the 'Cash to Close' amount is exactly what you expected.
Done when: [CD is signed and acknowledged 72 hours before closing]
Why: To ensure the seller has moved out, no new damage has occurred, and agreed repairs were completed.
How:
- Check that all appliances included in the sale are working.
- Flush toilets and turn on faucets to check for new leaks.
- Verify the house is in 'broom-clean' condition.
Done when: [Property is verified to be in the agreed-upon condition]
Why: Large sums must be sent via secure wire transfer; personal checks are rarely accepted at closing.
How:
- Call your attorney/title company to verify wire instructions (beware of email fraud).
- Visit your bank in person to initiate the transfer.
- Keep the 'Federal Reference Number' for tracking.
Done when: [Attorney confirms receipt of the full closing funds]
Why: This is the legal act that transfers ownership and creates your obligation to the lender.
How:
- Sign the 'Promissory Note' (your promise to pay back the loan).
- Sign the 'Deed of Trust' (puts the house up as collateral).
- Sign the 'Closing Statement' (final accounting of all money).
Done when: [All documents are signed and notarized]
Why: You have no way of knowing how many copies of the old keys exist with neighbors, contractors, or former owners.
How:
- Buy new deadbolt sets or hire a locksmith.
- Replace locks on the front, back, and garage entry doors.
- Reset the garage door opener code.
Done when: [All entry points are secured with new keys]
Why: It is much easier to clean these high-sanitation areas while the house is completely empty.
How:
- Scrub inside cabinets and drawers before putting away dishes.
- Sanitize toilets, tubs, and showers.
- Clean behind the refrigerator and stove if they were included.
Done when: [Kitchen and bathrooms are sanitized and ready for use]
Why: Moving day is exhausting; having a functional place to sleep on night one is vital for morale.
How:
- Assemble the bed frame first.
- Unpack clean sheets and pillows.
- Set up window coverings (even temporary ones) for privacy.
Done when: [Bed is made and the room is ready for sleep]