How Does The Closing Process Work?

I receive a ton of questions near the end of the real estate transaction regarding the closing process.

Rightly, buyers want to know what steps need to be taken in order for them to take possession of their new home.

Interestingly, this process can vary slightly from borrower to borrower. With that being said, there are certain steps that occur for the majority of transactions.

Here’s a look at the common stages of the real estate closing process:

1. Title search

Before you even sign documents at the closing, a title company will inspect the chain of title for the home you’re buying. This is done for the buyer’s protection.

Among other things, they want to ensure that there is a clear history of the title being transferred from one owner to the next.  There can be no disputes regarding ownership of the home.

2. Closing Disclosure sent to borrower

The Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).

The lender is required to give you the Closing Disclosure at least three business days before you close on the mortgage loan. The three-day window gives you time to ask your lender any questions before you go to the closing table.

3. Documents sent to escrow

After the title search has been completed, the mortgage lender will send loan documents to the escrow company that is handling the closing transaction. This typically happens after the lender’s underwriter has determined that the loan and borrower are approved.

It is here that you will receive a copy of the initial “settlement statement” that outlines all of the final costs and the exact funds you may be required to bring into the transaction

4. Seller and buyer sign documents

Believe it or not, in some states, buyers and sellers sit at a table together to sign the closing documents. Here in the west, however, the buyers and the sellers generally sign separately.

As a homebuyer, you will probably visit the escrow company on a scheduled date to sign your closing documents. Or have a notary sent to your location in many instances. This typically happens one to two days before the official closing date, but the exact timeline can vary.

5. Loan funding

Once the homebuyer has signed all of the closing documents, the escrow company will send them back to the lender for a final review.

If everything is in order and all of the necessary signatures are in place, the lender will then fund the loan. This generally happens on the scheduled closing date.

The timing of the real estate closing process can vary from one transaction to the next, due to the many variables involved. Generally, the loan funds and closes the day after the borrower signs documents.

6. Closing

Once all of the paperwork has been finalized, it will typically be delivered to the government recorder’s office to be “recorded”. The recording of the deed creates an official record of the ownership transfer. This is when the buyer officially becomes the owner of the home they’ve purchased.

In Conclusion

This process can change due to unexpected issues that can crop up along the way. So it’s important to be flexible during this process, and to stay in touch with me regarding the status of your closing process.

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.