So you’ve finally found the perfect home, the seller has accepted your offer—perhaps after some negotiation — and now you’re eager to get your keys. Homeownership is right around the corner, but there's one more hurdle to get through first: the closing process.
A real estate closing typically takes 30 to 40 days to complete and includes everything from a home inspection to signing the paperwork that seals the deal. To help prepare yourself for a smooth process, here are 10 steps to expect when closing on a house.
1. Deposit earnest money
One or two days after the seller accepts your offer, you'll need to deliver your earnest money to a title or escrow company, who will hold it while the home sale is in progress. Earnest money is usually 1%–3% of the home’s sale price and is a deposit you pay to show the seller you're committed to buying the home. If you back out of the deal for a reason that's not covered in the contract, you'll lose your earnest money. Learn more about earnest money
2. Complete your mortgage application
Once your offer on a home is accepted, you'll need to apply for your mortgage. If you decide to go with the same lender that issued your pre-approval, they will already have some of the documents you’ll need for your application. You’ll likely only need to provide updated financial statements. If you move forward with a different lender for your mortgage, they'll let you know what they need. All of this information will be reviewed by an underwriter to ensure you qualify for the loan you’re seeking.
Be aware that your lender will check your credit and finances a final time near the end of the closing process, so any new changes to those can impact your ability to get the loan—and the home.
3. Conduct a title search and order title insurance
A title is a legal document that shows the history of ownership of a home. After the seller has accepted your offer, an attorney or title company will review the home’s title to look for any problems that might prevent the home from being legally sold. Most importantly, they want to find out if anyone other than the owner has a claim on the home. They will then produce a title report with their findings.
Once you get your title report, read it immediately. You only have a few days after receiving it to review it. If you have a title contingency and you find problems on the title report that can't be cleared up, you can use that contingency to back out of the deal.
If the title search is returned "clear of defects," the title company or attorney will order a title insurance policy. This protects against financial losses in the event that a problem arises with the title after you buy the home.
4. Schedule a home inspection
Most buyers choose to have a home professionally inspected before they buy it. An inspector looks for any problems that could be expensive to fix or make the home unsafe, such as structural, electrical, or plumbing problems, pests, or non-working appliances. An inspection can also give you a head's-up about problems to keep an eye on after you buy the home. A standard inspection can cost $300–$400 or more, and you'll need to pay this up front.
Work with your agent to schedule your inspection. Depending on the home's location and condition, you may want additional inspections, such as sewer, termite, or roof inspections. You can usually attend these and ask the inspectors any questions that come to mind.
You'll receive a comprehensive report about any inspection findings, which you can discuss with your agent and use as a basis to ask for repairs or seller credits at closing. Learn more about home inspections.
5. Pay for an appraisal
An appraisal is an unbiased professional opinion of a home's value, and can help ensure that you're not overpaying for the home. Your lender will likely require a satisfactory appraisal before approving your loan. Some lenders will get an appraisal waiver, which can save you money and time.
If the appraiser decides the home is worth at least the purchase price—the amount you've agreed to pay in the contract—you're good to go. If the appraisal comes back too low, meaning the home isn't worth what you've agreed to pay, you probably have a couple options. Your agent can explain them based on your contract. FHA, VA, and USDA loans use a different appraisal process, so check with your agent or lender for details.
6. Buy homeowners insurance
A homeowners insurance policy protects the value of your home and personal property against fire, theft, and other damage. At closing, most mortgage companies will require you to show proof of an insurance policy already in place. This serves as a temporary agreement between you and the insurance company that becomes permanent once you officially own the home.
Your lender can typically walk you through your homeowners insurance options. You can also shop around for insurance yourself to find a plan that best fits your needs.
7. Finalize the loan with your lender
Loan approval can take a month or longer when closing on a house, so it typically comes through toward the end of the closing process. This is the last major piece that needs to fall into place for your closing to wrap up as scheduled.
8. Do a final walkthrough
The main reason for a final walkthrough is to make sure the home is in the condition in which you agreed to buy it. The walkthrough should happen a few days before closing, after the seller’s possessions have been completely moved out. The home will look different now that it's empty, but your focus should be on checking that any agreed-upon repairs have been made, and that nothing has gone wrong with the home since you last looked at it. We recommend using a final walkthrough checklist to make sure you don’t miss anything.
9. Gather your documents for closing on a house
The question of when a real estate closing happens can be a little confusing. Closing on a house—the process of transferring money and signing the final contract—typically takes place the day before the closing date set in the contract.
What does that mean for you? You'll need to have the money for your down payment and closing costs ready a day or two before your official closing date. Be sure to ask ahead of time if you should wire transfer the payment or bring a cashier's check. Unfortunately, a personal check won’t do.
The closing agent will send you a list of everything you need to bring to the closing. Often this includes:
- Government-issued photo ID
- Copy of your homeowners insurance policy
- Copy of your contract with the seller
- Home inspection reports
- Anything else the bank requires to approve your loan
- Cashier's check for down payment and closing costs (unless you'll pay by wire transfer)
- Checkbook (to cover any miscellaneous costs)
10. Sign the paperwork and get your keys
You’ve made it to the last step in the house closing process: signing the final paperwork. Closings usually take place at a title company with a closing agent and any co-borrower(s). There are also options now that allow you to do all of this online. Learn how eClosings work.
Take as much time as you need to read and understand everything before you sign. Some closing documents are written in dense language, so ask your attorney or real estate agent if you’re not clear on anything. If possible, take the day off from work. You don't want to have to worry about the clock ticking in the background when closing on a home.
Once all the documents are signed and the payments are exchanged, the home is yours! You may be able to get your keys that day or the next day. The waiting is finally over. Congratulations on your first home!