Closing on a House: How the Process Works

You’ve searched and searched and finally found the perfect home. You made an offer, the sellers accepted, and now you’re on the road to closing. But how long is the road, exactly? And what happens between now and closing day? We’re breaking it down for you, from the moment your offer is accepted until you turn the keys in the door and walk into your new home.

How Long It Takes to Close on a House

What’s the wait before closing on a house? There are two answers to this question. First, there is the amount of time it takes from having your offer accepted to sitting at the closing table. Second, there is the amount of time you’ll spend at the table on closing day. Let’s look at them both.

Before we begin, you should know that these are only estimations. Many factors, including your geographical location, the buyer and seller terms, your lender, and your credit can impact the time needed for closing. Some deals can close in a matter of days. Others can take six weeks or longer. Stay in contact with your real estate agent and your lender for the most updated timeline.

Time from Offer Acceptance to Closing

There’s a short answer and a long answer. The short answer: typically you’ll close 30-45 days after the seller accepts your offer.

The long answer: this timeline isn’t set in stone. It’s dependent on several factors. Once the seller accepts your offer, there are many variables at play.

The Home Inspection

First, you’ll schedule a home inspection since most buyers make an offer contingent on a favorable inspection. The inspector will examine the property inside and out, documenting any potential problems with the home. Once the inspection is complete, your inspector will provide you with a detailed list of all potential issues, highlighting the major red flags like roof damage, water leaks, foundation issues, electrical trouble, or problems with the HVAC system.

At this point, the buyer can walk away from the deal for nearly any reason related to the inspection. However, if the inspection reveals less significant problems, you can ask the seller to make repairs before closing. Of course, asking for a myriad of fixes could cause the sellers to get cold feet and back out of the deal, so be prudent with your repair requests. Your Realtor should advise you which repairs are necessary, and which you should plan to do yourself after closing.

The Purchase Agreement

Once both the buyers and the sellers agree on the repairs, they’ll sign the purchase agreement. This document outlines all the details, including final purchase price, responsibilities of the seller and buyer, down payment, earnest money, closing and occupation dates, and any contingencies.

Both parties sign the agreement, and the deal can move forward.

Ordering an Appraisal

Now that both parties have agreed on a deal, the mortgage lender will request an appraisal of the property to determine its market value. The lender requires an appraisal to ensure the home is worth at least its sales value and can be sold to recoup costs should you default on your loan. The lender should schedule this process and give you a report of the appraiser’s findings.

If the home appraises for at or above what you’re paying, there should be no issues. However, if the home appraises for less than the purchase price, there could be trouble. With home prices soaring, a below-price appraisal is not out of the realm of possibility. In most instances, this appraisal could impact your loan amount. If this happens, you have several choices:

• Ask the seller to accept less than the agreed on price, coming in line with the appraisal.
• Renegotiate the terms, offering concessions that will make up for the price difference (covering a percentage of closing costs, limiting requested repairs, etc.)
• Offer “appraisal gap coverage,” which means you’ll be making up the difference between the appraised amount and the purchase price in cash. Typically, you’ll include an appraisal gap in your initial offer, but this can be done post-appraisal as well.
• Challenge the home appraisal or ask for a new one. It might not change the outcome, but you are entitled to ask for another appraiser to take a look.
• Walk away. If you simply can’t come to an agreement that works for both parties, you might have to walk away from the deal and look for something else.

According to a May 2021 report, only about 19% of appraisals came back lower than the offered price. Chances are, the home will appraise for what you offered, and the deal moves on to the next step.

Mortgage Application Processing and Underwriting

After you’ve signed the purchase agreement, the lender will have you complete a more in-depth mortgage application. This will include detailed financial information, employment history, and an accounting of your assets and debts. Today, much of this information can be submitted online, using electronic signatures.

Once your application is approved, your loan moves into the underwriting stage. Here, an expert takes a closer look at your application to ensure you’ll be able to afford the monthly payments on your mortgage. If the underwriter determines you’re a low-risk candidate for a mortgage loan, you’ll be cleared to close. (Be careful at this stage: you can still be denied all the way up to the closing table. Learn how to avoid being denied after clear to close HERE).

Once you’re cleared to close, your lender will schedule a closing date with the sellers, real estate agents, and the title company.

What Slows Down the Process

Many factors can slow down the closing process. Negotiating repairs, for instance, can be a days-long back and forth between buyers and sellers. Buyers typically complete a final walkthrough either the day before or the day of closing, and incomplete repairs or unacceptable conditions at walkthrough can also delay closing.

You might also experience hiccups during the mortgage application or underwriting process. Incomplete information, trouble in your credit history, and other issues can cause delays in the loan process, which in turn leads to a delayed closing.

The type of mortgage loan plays into the closing process, too. Some government-backed loans like VA or FHA loans can take longer to process.

Finally, the timeline is all dependent on both the buyers’ and sellers’ calendars. If the sellers need to remain in their home for 60 days after they accept your offer, you’ll have to wait to sign the papers and take ownership. Such delays will be agreed upon when you sign the initial contract, so you shouldn’t have any last-minute surprises.

Time Needed on Closing Day

Finally, underwriting is finished, the sellers have completed repairs, and you’re closing on a house at last. The lender, title company, and all parties will agree to a date and time that will give everyone adequate time to complete paperwork. On closing day, both the buyers and sellers and their agents will gather – typically at a title company office – to complete the paperwork and seal the deal. After that, the home legally becomes yours.

Expect closing to take 1-2 hours, but leave time in your schedule to account for possible complications.

Keep reading to learn what to expect on closing day.

Closing on A House: The Day of Closing

You’ll likely know the closing date and time several days beforehand. The buyers, sellers, their agents, and a representative from the title company or mortgage company will be present at closing.

Where Closing Takes Place

Closing always takes place at the escrowee’s office, which is usually the title company that secures the ownership of your house.

Who Goes to Closing?

Each state is different when it comes to closing on a house. Depending on your location, you (the buyer) may be in the same room as the sellers for the closing, along with your attorneys or real estate agents, a representative from the mortgage office, and the title company representative.

Sellers who live out of state may sign the deed and other documents ahead of time and do not need to be present at closing.

If you’re curious who will be at the closing table, ask your Realtor or title company representative.

What to Bring to Closing

Closing on a home is a legal process, so you must have the following to proceed:

• A legal photo ID, such as a driver’s license, passport, or other government-issued identification card.
• Your Closing Disclosure, given to you at least three days before closing.
• Any other outstanding documents as identified by the seller, your real estate agent, the title company, or the mortgage lender.
• A certified check or receipt for wire transfer for closing costs and other funds you owe at closing.
• A hand ready to sign, sign, and sign some more.

What You Will Pay at Closing

Long before closing on your house, the lender and title company should provide you with a detailed accounting of what you’ll owe at the closing table. Expect closing costs to be somewhere between 2-5% of the home’s price. The seller will pay all Realtor commissions.

You’ll likely be required to either bring a certified cashier’s check with the exact amount or request a wire transfer from your bank to the seller’s account. Be sure to double check dollar amounts and account information before wiring money.

Wire Transfers Before Closing

Increasingly, lenders are requesting involved parties to transfer funds electronically between accounts. If that’s the case when closing on your house, you will need to start the wire transfer process at least 24 hours before closing. Call your bank to confirm how long it will take to complete a transfer.

With more and more banks requesting wire transfers, fraudulent activity is on the rise. If you receive a call from someone claiming to be a bank representative, be wary. You should be the one to call and initiate the transfer, and banks will have multiple safeguards in place to ensure your money is getting to the right place.

What is Due at the Closing Table

You will receive a final Closing Disclosure at least three days before closing on a house. The dollar amount reflected in the disclosure will reflect the following costs:

• All outstanding fees, including the lender origination fee, appraisal fee, and inspector fees.
• Pro-rated portion of annual property taxes.
• Any interest that will accrue on your mortgage prior to your first payment.
• Homeowner’s insurance fees and payments.
• Title insurance premiums, if necessary.
• Pro-rated HOA fees, if applicable.

Why Is Closing on a House So Expensive?

Why does it take so long to close on a house? And why is it so expensive? There are many moving pieces, from several different agencies, all transferring legal ownership of a home and property to you, the new owner. As the buyer, you have more paperwork to sign than the seller, so get comfortable in that chair at the closing table.

Here’s the breakdown of what you’ll sign at closing:

• Real estate transfer documents, like the bill of sale, the deed to the property, and a title affidavit.
• Documents related to your mortgage, including a promissory note, and title documents.
• Escrow disclosures, identifying the amount that will be rolled into your monthly payment to cover taxes and insurance.
• Notice of Right to Cancel document, which gives the buyer three days to cancel the whole deal.
• Other miscellaneous forms like a certificate of occupancy (on new-builds) or HOA information forms.

Closing fees cover real estate agent commissions, filing fees for all legal documents, and fees charged by the lender. Some of these fees are negotiable. You could save hundreds – maybe even thousands – of dollars simply by asking if there is any wiggle room in the closing costs.

After closing, you’ll get the keys to your new home, and it will legally be yours. Congratulations!