So you've taken the plunge and picked out the home of your dreams. After what might seem like a whirlwind of getting pre-qualified for a home loan, putting in an offer and (hopefully) getting the price you want, you're finally ready to set up for closing.
Your real estate agent may set up a closing timeline based on input from you, the seller and your mortgage lender. During this time, it's easy to feel like you're just sitting around twiddling your thumbs, but there's still a number of things that need to happen to ensure you close successfully and on time. All in all, expect this process to last anywhere from 1 to 2 months in most cases.
What Happens in the Days Leading Up to Closing?
At this point, what can you do to make sure that your closing proceeds without any hiccups? Assuming you're being financed by a mortgage lender, they'll want to verify two things at this step:
- Your financial information
- Value and title of your new home
Step 1: Verifying the Borrower
It's a good idea at this point to gather your tax returns, pay stubs, bank statements as well as any other items the lender may request. Your loan officer can assist you through this step of the process. You'll also need to sign a preliminary loan application as well as authorize the lender to pull your credit report.
Once they have your documents in hand, the lender will use this data to verify your qualifications for the loan.
Step 2: Verifying the Home
The lender will also take steps to verify the value of the property you're purchasing, starting by obtaining a title report to see whether there are any liens against the property that might prevent it from being sold. They will also send a licensed appraiser to conduct a full inspection of the property and obtain an estimate of its value.
Once details to both the borrower and the home have been verified, the lender's underwriting team will use the data to compile the final terms of your loan agreement, including the interest rate, term, and total loan amount.
Step 3: What Happens on Closing Day?
The final step consists of the closing meeting itself. Generally speaking, the closing will be attended by an attorney who represents the bank, notary or settlement agent, depending on the laws of your state. The title company may also send its own representative, known as the "title agent," who ensures that all the necessary conditions for the title transfer are met. All closing documents will need to be signed at this time, including, but not limited to the following:
- Promissory Note: Promise from the borrower to repay the mortgage; will contain your rate, term, and amount loaned.
- Mortgage: Deed of trust that signifies the lender's claim to the property if you default.
If all of the documents and conditions are met for the closing to complete, the loan will fund at the table and the loan amount will be exchanged for title to the home. Upon closing, you will be responsible for making monthly mortgage payments on the property. In most cases, the first payment will be due on the second month after closing, but your mortgage documents will contain your actual due date.