You’re getting ready to close on a new home – congratulations! You’ve completed your house hunt, you negotiated the price, and your offer was accepted. Before you get handed the keys to your new house, there’s one final step you’ll have to complete – closing on your home.
What is closing?
It’s the final step to transfer ownership of the property to you once all contingencies for the sale have been eliminated. To prepare for closing, your lending agency will originate and underwrite your loan and the title company will prepare paperwork for you to sign and make the transfer of ownership legal.
What happens during closing?
As soon as the seller accepts your offer and all contingencies have been met, the sale of the home is “pending” and closing begins. A thorough home inspection will be completed by a professional inspector to uncover any defects or local building code violations that might impact the value of the house. Your mortgage company will begin the time-consuming task of originating and underwriting your loan. They will be taking a very close look at your finances to decide whether you’ll repay the thousands of dollars you’re asking them to lend you.
Being pre-approved for a loan means your lender already pulled your credit score, verified your income, and gave you an idea of the type and size of mortgage you qualify for. Having this information makes it likely you’ve selected a home you can afford and your lender will help you finance. But being pre-approved is not a guarantee you’ll be given a final approval for your loan. If anything has happened since you were pre-approved that might affect your finances (losing a job, taking out another loan, missing payments on your mortgage, etc.), you could be denied the loan.
How long does closing take?
It took an average of 49 days in November 2020 for all the paperwork to be completed and the transfer of ownership to be finalized. The number fluctuates a bit every month, but 30 to 60 days is a good estimate. The dedicated loan officers at Mann Mortgage strive to close loans in 30 days or less.
Have your documents in order
During closing, be ready to hand over a lot of documents to your mortgage company for final approval of your loan. Your loan officer will likely have a lot of questions for you. Answer their questions quickly to avoid delays in your closing date.
You’ll probably need the following:
- Your last two tax returns
- Your last two pay stubs
- Your last two W2 statements
- Your bank statements for the last one to three months
You may also need:
- Credit card statements
- Settlement statements
- Verification of rent
- Divorce decree
- Bankruptcy documents
- Statement of Social Security or retirement income
- Copies of rental lease agreements on rental units
- Contact information for your homeowner’s insurance agent
- A profit and loss statement
- Proof of additional income
Expect to pay closing costs
Some common closing costs are listed below. All of them have to be paid when closing on your new house.
Unless otherwise negotiated by your Realtor,
the buyer pays all the following:
- Home inspection fee ($500 to 1,000)
- Loan origination and underwriting fee (0.5% to 1% of the loan amount)
- Credit check fee ($25 to $60)
- First month’s interest (varies)
- Flood certification fee ($15 to $25)
- Title/escrow services and insurance ($200 to $400)
- City or county recording fee (varies)
- Transfer taxes (varies)
- Realtor or broker fee (2% to 7% of the home’s price)
This isn’t an exhaustive list of every document and fee you’ll pay, but it will give you a good idea of where to start. If you have trouble finding documents your loan officer requests, ask them if there are alternative documents you can provide in their place.
Be prepared for closing day
Closing day might start with a final walk-through of the house to make sure it is in good shape and the seller met all contingencies. At the appointed time, you and the seller will meet and sign documents with your title or escrow agent, real estate agent, and possibly an attorney. Take as much time as you need to make sure you understand what you are signing.
Once all the paperwork is signed and any fees are paid, the ownership of the house it transferred to your name and the home is yours.
At any point, if you have any questions about your closing costs, loan options, or getting pre-approved, be sure to talk to your local loan expert at Mann Mortgage. We are here to help you make your closing as seamless and quick as possible.