What to Expect When Closing on a House

Closing when buying a house takes an average of 45 days. As a buyer, you have several responsibilities during the closing, including getting approved for your mortgage, acquiring title insurance, and readying your finances for the final sale. You should also avoid doing anything that could negatively affect your cash flow and credit score.

What is closing?

You walked through countless houses before finally finding the one you wanted. You stressed over how much to offer, then sweated while waiting for the seller to accept. The good news is that the seller did accept, and you're about to own the property. The not-so-good news is that your home-buying journey isn’t over. You still have to close.

Closing refers to the final phase of a real estate transaction, concluding with the transfer of the property’s ownership. It can initially seem overwhelming because of the multiple moving parts and your many responsibilities as the buyer. Still, with a basic understanding of how a closing works and what you need to do (and maybe with a bit of assistance from your realtor), you can make the process smooth and be in your new home before you know it.

How long does it take to close?

According to ICE Mortgage Technology, the average time to close a home purchase in May 2023 was 43 days. However, the closing process can range from a week to two months or longer. According to Zillow, factors that affect the timing include whether or not you’re buying the home with a mortgage, the kind of mortgage, and the type of property you’re buying.

A closing involves multiple parties, including:

• The buyer.
• The seller.
• The lender.
• An escrow agent.
• A title company.
• The buyer’s and seller’s (unless it’s a sale by owner) real estate agents.

What are the buyer’s responsibilities during closing?

Much of the closing burden rests upon the buyer’s shoulders—you have much to do. Fortunately, your real estate agent can help. As soon as you sign the purchase agreement, ask your agent to review your closing responsibilities. Find out where they might be able to lend a hand.

Your responsibilities include the following:

Submit your application for a mortgage

Even if you got a mortgage preapproval, you need to complete a final loan application and submit it to your lender. Expect the final approval to take several weeks. Be on the lookout for requests for additional information from the lender and respond as quickly and accurately as possible.

The lender will send a loan estimate within a few days of receiving your application. Review this carefully. It includes important details, such as your contact information, interest rate, loan term, and closing costs. Contact your loan officer if any information is incorrect or you have any questions.

What to do: Contact your loan officer to let them know you’ve signed a purchase agreement and are ready to complete the final mortgage application.

Hire a title company

A title company performs multiple essential functions during the close.

• It does a title search on the property. This helps ensure that there are no outstanding taxes, debts, liens, or ownership disputes related to the property. Such discrepancies would become your problems once the title transfers, so if the search reveals anything, address it with the seller before the title transfer happens.
• It provides title insurance. This is an added layer of assurance should a discrepancy reveal itself after the title transfer.
• It opens an escrow account. The bank account will hold your escrow money and other funds until closing.
• It manages the final closing. The title company will ensure that you and the seller sign all the documentation required for the sale. It will also facilitate the transfer of funds from you to the seller.

What to do: You can search for title companies online, ask family members or colleagues for recommendations, or see if your real estate agent has a preferred title company.

Deposit your earnest money in the escrow account

Your earnest money (usually 1% to 3% of the sale price) is a financial commitment to buy a home and often required in purchase contracts. Earnest money protects the seller: If you decide to walk away from the sale, the seller keeps the earnest money. The good news is that when you complete the sale, the earnest money goes toward your down payment.

What to do: Contact the title company and ask how to deposit your earnest money in the escrow account set up for your purchase.

Hire a professional home inspector

A home inspection is an independent property assessment by a dedicated professional. The inspector focuses on the home's major mechanical systems, including electrical, plumbing, and HVAC; structural elements, such as the roof, flooring, and foundation; and potential safety issues.

If possible, you'll want to attend the inspection—it can be a great way to familiarize yourself with your new home. In any event, you'll receive a full report of the inspector's findings. Discuss any serious issues with the seller and either ask the seller to complete repairs or lower the sale price to account for the cost of repairs.

Schedule the home inspection as soon as possible after the purchase agreement is signed. If the inspector needs to refer you to a specialist for an additional inspection (for example, to focus on the wiring in an older home), you’ll have plenty of time to get that done. Scheduling early will also give the seller more time to complete any necessary repairs.

What to do: You can find a home inspector online—the American Society of Home Inspectors has an easy-to-use search tool. Alternatively, you can ask for referrals from friends, family, or colleagues who’ve recently bought a house, or ask your real estate agent for recommendations.

Review the closing disclosure and respond to all lender inquiries

Your lender will send you a closing disclosure document at least three days before the scheduled close. This will include all the pertinent details of your loan, including the interest rate, down payment amount, monthly payments, and term.

What to do: Read the closing disclosure carefully. Its details should match that of the loan estimate. Contact your lender if you see any discrepancies or have any questions.

Buy a homeowners insurance policy

Homeowners insurance provides financial protection if the home is damaged by fire, severe weather, vandalism, or other incidents. Your lender will require you to have a policy, as it has a significant financial stake in the property.

What to do: Contact an insurance agent or broker to purchase a homeowners policy.

Do a final walk-through

During a final walk-through, you’ll take one more look at the home before closing. You’ll want to make sure all of the following work properly:

• Light switches and electrical outlets (bring a small plug-in light to test outlets).
• Sink and bathtub/shower faucets and drains.
• Kitchen garbage disposal.
• Kitchen and bathroom exhaust fans.
• Toilets.
• Door locks and window latches.
• Smoke detectors.
• Furnace and air conditioning system or units.
• Water heater.
• Outdoor spigots.
• Garage door opener.

Make sure the seller has completed any post-inspection repairs and that the home is in the same condition as when you signed the purchase agreement.

What to do: Arrange a time you can come to the home when the seller is not present—your realtor may be able to help. Print off a final walk-through checklist (an online search will provide many options, such as this one), and spend a couple of hours carefully walking through the home.

Get your finances in order

Although this is the final item on this list, you’ll want to start getting your finances in order as soon as the closing process begins (if not sooner). Your expenses will include the following:

What are the seller’s responsibilities during closing?

The seller typically has fewer responsibilities during the close. However, their cooperation is vital for making the process go smoothly.

The seller’s main responsibility is to fill out a written disclosure explaining whether the home has any known issues that might affect its value. This gives you even more information about the home. It also limits your ability to sue the seller in the future.

How long does a closing take?

The closing process ends with a meeting at the title company's office on closing day (since the pandemic, these meetings increasingly take place virtually). You'll sign a wide range of documents, pay closing costs, and hand over your down payment. The title company will transfer the title, and the home will officially be in your name.

Expect this meeting to last anywhere from one to two hours. You may want your real estate agent to attend, as well as your attorney (if you use one for the home purchase). The seller may not attend, having handled their title transfer needs in a separate meeting.

What do you need to bring to closing day?

The title company will let you know what to bring to this meeting, but you should expect to have the following on hand:

• A government-issued photo ID
• Your copy of the closing disclosure
• A cashier’s check for the closing costs and down payment or, if you’re using a wire transfer, proof of that transaction
• Proof of your new homeowners insurance policy
• Your copy of the closing disclosure

You should confirm by phone with your title company before you have money wired. While wire transfers are largely safe, scams targeting the real estate industry (and home buyers) do exist.

How much are closing costs and who pays them?

Closing costs vary and are often estimated at 2% to 5% of the home's sale price. These are typically the responsibility of the buyer. Note that the seller usually pays the real estate agent’s commission.

Use this calculator to estimate closing costs based on your home’s sale price and other purchase details.

How to avoid common roadblocks to closing

Be sure to do all you can to avoid any roadblocks or delays in the closing process.

First and foremost, respond to any questions or requests from your lender or real estate agent quickly and accurately. The lender has several steps to complete to approve your loan application, and it’s not unusual for it to need additional information from the borrower.

Next, avoid doing anything that might negatively impact your credit history or cash flow. This includes adding debt or making a big purchase (such as a car), quitting your job, paying bills late, or changing banks.

TIME Stamp: Prepare in advance

Closing is a multistep process that can seem daunting at first. However, none of the many steps required of the buyer are particularly difficult, and in most cases you'll have help from your realtor.

By preparing in advance and knowing what the process entails, you can help ensure that the closing goes smoothly. Before you know it, you'll be in your new home.

Frequently asked questions (FAQs)

What should you not do when closing?

When closing on a home, avoid doing anything that might negatively impact your credit history or cash flow. This includes adding debt or making a big purchase (such as a car), quitting your job, paying bills late, or changing banks. These actions might alter your overall financial picture and affect the lender's approval of your mortgage application.

Does the lender check your bank account before closing?

The lender needs to know how much money you have in your bank account and will ask for bank statements. It will also want to know where that money came from and may ask you to provide recent paystubs, W-2 forms, or tax returns. This information helps assure the lender that you can keep up with your mortgage payments.

What should sellers leave for buyers?

Unless provisions are made in the purchase contract, the seller should leave behind anything permanently affixed to the home or anchored to the yard. It’s also customary to leave behind window treatments.