What Happens on Closing Day When You Buy a Home?
Closing day is one of the best moments of a first-time home buyer’s life. This is the day when everything becomes a reality. You officially sign on the dotted line, and the home begins the transfer process to you. However, many people heading into this process are not too sure what to expect and how to prepare for what is to come. There are a few key things you should know as a home buyer on closing day.
What Happens on Closing Day?
Closing day is a time where you will meet with the closing agent, the person who will walk you through your loan documents, and all of the legal contracts involved. This process can take two hours or longer in some cases. Sometimes, closing day happens at wherever you are living now. Other times, the closing agent will have to come to their office to complete the documents.
There’s no reason to be nervous or worried on closing day. You already know all of the details, and the transaction is going forward. Yet, you do want to be open about any questions you have. It’s important for this process to be in-person. That’s because laws often require in-person signatures to occur.
Who Is at the Closing?
Most of the time, you and the closing agent will meet. Most of the time, the closing agent meets with the buyer and the seller separately, though in some states, they may bring both parties together. This is rare. The closing agent may work for a title company, an escrow company, or an attorney. They are the neutral third-party in this transaction. In other words, they do not represent you or the seller, but rather provide information to both. They also do not make changes to any contract, and they cannot alter terms.
What Should You Bring to the Closing?
The closing agent will provide you with specific information on what to bring to the closing. This is generally going to include a photo identification, such as a driver’s license or a state ID card. They need to have a current and valid document to use.
If you are paying closing costs at the time of closing, you will also need to bring that with you as well. The agent does not accept personal checks, though. This is generally going to be required in a cashier’s check or otherwise certified check. You can obtain this from your bank. The closing agent will provide you with the specific information about how much to write out this check for in advance of your appointment. You may need to have separate checks made out, too. One may be going to the mortgage company and the other to the seller, for example.
You may also be required to bring with you proof of insurance. Lenders need to know the home is covered properly before making this transaction happen. You may need a letter from your insurance agent showing this. Otherwise, the mortgage lender will contact the insurance company directly for this information.
It’s not likely you’ll need anything else, but be sure to follow the information and instructions provided by the closing agent ahead of your closing date. Keep in mind the law requires that you have at least one full day to gather this necessary information prior to the closing date.
What Papers Will You Sign?
During the closing process, you will need to sign a number of documents. These documents include information you need to read and understand. The closing agent will work with you through the process to ensure the details are exactly what is expected. Some of the key documents you will need to sign include:
Property Disclosures and Forms
One of the key steps in the closing process is for you to understand the exact details of the loan. The documents related to the closing include these:
- Closing disclosure, a list that line-by-line shows the closing costs associated with the loan, broken down by seller and buyer
- Warranty title or deed: This transfers the title of the property from the seller to the buyer. It provides a full legal description of the property.
- Proration documents outline when property taxes, homeowners association dues, and other costs associated with the property will be divided.
- Inspection documents and survey reports
- Statement of identity, which outlines the details of the transaction.
- Mortgage Documents
- The process also includes signing all documents associated with the loan:
- The promissory note outlines the loan terms, interest rates, and fees
- Truth in lending disclosure is the document you’ll sign that breaks down the loan terms including interest rate, APR, and other details of what’s being financed
- Mortgage or deed of trust documents give the bank the right to foreclose on you if you fail to make payments as agreed
During this entire process, you will have the ability to have each line of the document explained to you, so you understand it. At the same time, if you don’t agree with the information or you do not feel this is what was promised to you, now is the time to speak up.
The closing process may seem overwhelming, but it doesn’t have to be if you’ve worked with your agent and lender to really understand the terms of your loan. For most people, this is an exciting opportunity to buy their dream home and officially own it.