You’ve shopped for homes for months. You’ve shopped for mortgages for weeks. You’ve run so many scenarios on mortgage calculators, your fingers have callouses. Finally, the stars have aligned and the closing date has been set. You’re ready to meet and grab those keys. It’s clear sailing from here on out, right? Well, not always. Closing, or settlement, is a lot more than having the keys to your new home turned over to you. Know what to expect when closing on a house, and you can avoid any unpleasant surprises. For instance, there are papers to sign – lots of them – and costs to pay – lots of them. Even many seasoned homebuyers find the closing process to be shrouded in mystery. Here’s a quick rundown of what the process typically entails.
While most buyers consider closing to be the day when they sign the final bill of sale, the closing process actually starts a lot sooner – usually weeks before – when you sign the purchase agreement. The final day of closing is when you seal the deal, signing papers to finalize your sale and mortgage and paying the costs associated with the loan and the sale itself.
The answer to this depends a lot on where you live. In some areas, it’s a lawyer; in others, it’s an escrow or settlement company; and in still others, it’s the company that performed your title search. No matter who handles your closing, their responsibilities are similar: They’ll make sure taxes associated with the sale are paid, have the deed recorded and file other documents required by the laws of your area. Unlike the real estate agent, the closing agent represents and helps both the buyer and the seller equally.
Closing costs including all the taxes and fees associated with the final sale of the property usually range from 2 percent to 6 percent of the cost of the home. That means if the home costs $200,000, you can expect fees from an acceptable $4,000 to a chilling $12,000 depending on your area. Some lenders may offer no-closing-fee loans; while these are certainly a good option for many, be aware that most of these loans involve higher interest fees to make up the difference. Just as you got a good faith estimate (GFE) from your lender, at closing you’ll get a HUD-1 form detailing all your actual costs. Some costs can be negotiated or eliminated before closing, so pay attention to your GFE and negotiate fees wherever you can.