If you are looking into details on what exactly the closing process entails on your new home, you’re likely in the final stages of the process to homeownership, so, congratulations! Although the journey may feel like a long one, each step in the process is imperative to protect you, the sellers, and your new property. Your offer was just accepted and now closing is upon you. Typically closings take anywhere between 30 and 60 days, but in some instances, they can be longer or shorter depending on the terms set forth in your original offer as discussed with your agent.
When it comes to closing on a home, whether your first or tenth, there are various steps that you will need to take to ensure full confidence and satisfaction in your purchase. These 10 steps are the exact route you need to take to reach your final destination as a homeowner.
1. Choose your escrow agent
The escrow, or closing, agent will be your primary point of contact when it comes to closing on your new property. They verify that all documents are completed and signed by both parties, all terms and conditions of the offer and loan are met and that closing happens in a timely manner. The escrow agent works closely with your realtor to coordinate all required paperwork throughout the process. Typically the escrow agent is a neutral third party in the transaction, acting on behalf of both parties to ensure a smooth transition of ownership for the home.
2. Purchase homeowners insurance
Homeowner’s insurance is required for the purchase of any home. The insurance must be purchased prior to closing and proof of coverage must be presented during the closing stage. You can usually work with your current insurance company to provide a new quote on your property. Homeowners insurance, just like car insurance, varies greatly based on location, size of property, your insurance history and other factors. The average cost of homeowners insurance in the US is about $1,200 a year.
3. Invest in title insurance
Title insurance is a one-time expense that you pay prior to closing on your home. Title insurance, although not required in every state, is added protection for you and your home. Title insurance protects you in the event that someone, at any time in the future, stakes a claim on your property claiming it as theirs. If you opt-out of a title insurance policy for you, you could potentially lose your home to a random claim on it in the future. The average cost for title insurance, to the buyer, is about $1,000.
4. Meet all conditions
Before you can officially close on a home, all conditions of the loan must be met by you, the buyer. All conditions of your loan are clearly stated in your loan document, but typically they include things like income verification, proof of obtained homeowner’s insurance, down payment details, final appraisal that is at or below the amount of the loan and any other specifically negotiated terms. If you have any questions or concerns about meeting all of your loan condition requirements talk to your lender and realtor as soon as possible to avoid any snags in the process.
5. Get ready for your move
Whether you currently own your home or are living in a rental property, now is the time to get ready for your move. Schedule movers, sort through rooms and storage spaces and plan out exactly how you plan to move your things from one spot to another. If you’re downsizing you may want to consider holding a yard sale to get rid of extra items you no longer need or donating any excess to a local charity. If you’re moving to a bigger place, consider planning out your furniture and appliances purchases now so that they are ready to go on move-in day. Don’t forget to schedule time off from work, if needed, to get your place in order.
6. Obtain the ever-important closing disclosure
This nationally recognized form is the most critical and comprehensive form in your closing process. Within this disclosure, the loan requirements are outlined in their entirety, including an itemized list of closing costs by party. This form should be delivered to you at least three business days before the closing date to ensure you have enough time to review it. If the details within are mismatched from the original loan agreement, talk to your lender as soon as possible to reconcile in an efficient manner.
7. Complete a final walkthrough of your new place
The final walkthrough is an important final step in your closing process. It is typically scheduled about 12-24 hours before your final closing timeline. This in-person review gives you, the buyer, the opportunity to walk throughout the property and ensure that the seller left the home in the condition that you agreed to at the time of offer acceptance. This is also a time to review any repairs that were requested of the seller and to make sure they are fully moved out in time for you to move in. If things don’t look as they should, your realtor will work with the sellers to ensure things are aligned promptly. If major repairs need to be made, the closing can be delayed.
8. Finalize your documents
At closing, the escrow agent will request a list of documents that they require of you and your co-borrower. Organize your documents ahead of time so that you are fully prepared for the meeting. Typically they require documents such as photo identification, income verification, a list of home addresses over the last 5-10 years and a money order or bank certified check to cover the closing costs for “cash at close” requirements. Verify required documents with your realtor and lender prior to meeting with them.
9. Legally obtain your home and your new set of keys
The last step in the process between you and the seller is to legally transfer the property from their name to yours. At this step final signatures are obtained and cash, if applicable, is exchanged. Once this is completed the home belongs to you and you get the keys to your new home! A best practice is to change out the locks on your home once you have keys in hand to maintain the highest level of security at your new property.
10. File a declaration of homestead
A declaration of homestead varies by state, but is a good idea to obtain based on protections it can provide at both state and federal levels. In some states throughout the country, a declaration of homestead is automatically added at the time of home purchase, but some states require that you obtain one on your own. In short, a declaration of homestead can protect you in the case of bankruptcy filing, loss of a spouse or exempt you from certain taxes based on residence. A declaration of homestead registers you at state and federal levels, showing exactly where your primary residence is located. Check with your state government, lender or realtor to verify how your state handles this declaration.
Getting an accepted offer on a home you love is a great feeling, but it is only the first step in the home buying process. Once both the seller and buyer agree to all terms and conditions of the offer, the closing stage begins. It is important to stay on top of the steps required to successfully close on a home so that you are as prepared as possible during this new season in your life. If you are in search of a new home or considering putting your home on the market, contact me, we would love to help you through the realty process, no matter what side you find yourself on.