What Happens at Closing and How to Prepare

You’ve made it through the maze of steps and decisions that come with buying a home. Your loan is approved, the seller has accepted your offer, and now it’s time to close. The end is in sight, but what exactly does “close” or “closing” mean? Who is involved, and what do you need to prepare?

What exactly is closing?

Closing, sometimes referred to as settlement, is the final stage in the home buying process. Score! Simply put, it’s 1) the official transfer of ownership from home seller to homebuyer and 2) the final distribution of funds. The transfer of ownership is somewhat self-explanatory. At closing, ownership is transferred from the seller signing the deed of the home over to you, the buyer. From there, the deed will be legally recorded by the title company. Also at closing, the seller and real estate agent will receive their payments, and you’ll pay the closing costs associated with your home purchase. This is the aforementioned distribution of funds. Now that you understand what will actually happen at closing, you’ll need to prepare for the big day.

Who will be there?

Most likely the seller, a representative from your lender and/or title company, a closing agent, and you will be present during closing. In some circumstances a lawyer or attorney may be present on behalf of the lender or you. In case you’re wondering, typically, the seller will not be present. They will likely close at a different time of the day.

What do you need to bring to closing?

Identification

You may be surprised at how often people forget identification at closing. Don’t be a statistic, be sure to bring your current and valid identification — maybe two forms just in case.

Documents

Just to be on the safe side, bring all of the documents you’ve received thus far in the homebuying process. This includes (but isn’t limited to) documents regarding your loan, proof of insurance, the home inspection report, bidding negotiations, etc. When in doubt, bring it with you.

Funds

As mentioned above, the final distribution of funds occur at closing — aka, paying your closing costs and down payment. In some cases, you may have negotiated closing costs to be covered by the seller. However, they’ll still be itemized for your review. Not sure what closing costs are? These are the fees associated with processing your home loan. You will receive a Closing Disclosure three business days before closing, which outlines your closing costs.

Types of Closing Costs

Another important note is that you’re required to make this payment via a certified check, not a personal check. What’s the difference? A certified check is just that, certified, and guarantees a payment.

According to NerdWallet, a certified check “is a personal check written by an account holder, drawn on the holder’s account and guaranteed by the bank.” Most banks may charge a fee for processing a certified check. In some circumstances, you may choose to pay your closing costs and down payment via a wire transfer instead of a certified check. Double check with your closing agent first to confirm which payment methods will be accepted and preferred. What is a wire transfer? This is an electronic transmission of certified funds from your bank. Be mindful that some banks have a particular window of time during business hours where they conduct wire transfers. If this is the case, you’ll want to make sure you schedule your closing day accordingly.

Patience

Closing on a home purchase can be very repetitive. You’ll need to prep your John Hancock, as you’ll be signing quite a bit of paperwork. Also, your settlement agent will review all of the financial figures of your purchase with you in many different ways, in great detail. But don’t be discouraged. All of the repetition is to your benefit to make sure you have ample opportunity to understand and ask questions about this very big and important purchase. Try and see past what may feel like a monotonous meeting and really pay attention to make sure you truly understand all that is presented to you. And remember, at the end of all this, you’ll receive the keys to your new home!