What to Expect at a Mortgage Closing

Closing day in the context of a mortgage refers to the day when a real estate transaction is finalized and the property officially changes ownership from the seller to the buyer.

In other words: It’s the day that the seller gets their money, and you get the keys to your new home.

How Long Does It Take to Get to Closing Day?

You can generally expect about six or seven weeks to pass between the time your mortgage application is submitted to your lender until the actual closing. However, that process can be shortened considerably if you’ve gone through a mortgage pre-approval process. Unfortunately, it can also take longer, depending on how busy your lender’s underwriting department is when they receive your application in their queue.

According to records, the average closing period in 2020 was 47 days, but your closing can be delayed for a number of reasons, including:

• A lower-than-expected appraisal: Appraisal gaps, where the appraisal comes back lower than the home’s purchase price, can throw a big wrench into your plans. At a minimum, it can cause a significant delay in your purchase (if it doesn’t tank the deal entirely).
• Unmet contingencies: Contingencies are clauses in a purchase agreement that must be met before the deal can go through. Unmet contingencies by either party (buyer or seller) will definitely hold things up.
• Problems with the title: Hopefully, there won’t be any mistakes or “clouds” on the title that could affect the smooth transition of ownership. If there are, they will need to be cleared up before you can proceed.
• Difficulties obtaining insurance: You will need to obtain home insurance prior to your closing date. Most homebuyers put their home insurance into escrow (along with property taxes) so that the bill is paid monthly along with the mortgage payment. Shopping early for a homeowner’s policy can help you find an insurance company that is suitable for your needs and within your price range. 

Typically, once your mortgage application is approved, your lender will schedule the closing date, and your real estate professional will help you coordinate with all the involved parties, including the title company and the seller. It’s important to be as flexible as you can – because unexpected delays can and do occur.

Once You Have the Closing Date, What’s Next?

A few days before your closing, you will receive a closing disclosure document. You should review this document carefully to make sure that all the information is correct and matches your expectations. If something isn’t the way you remember it, don’t panic – but do call your loan officer and your real estate professional right away.

One of the most important items you’ll find in the disclosure document is the amount of “cash to close,” which is the amount of money you need to bring with you on the big day. Typically, this includes:

• Your down payment (which you may not have if you used a VA loan or certain other government-backed loans) less your earnest money and any seller credits.
• Prepaid costs that were covered by the seller for the remainder of the year (such as homeowners association fees and property taxes).

Since it’s not exactly safe to carry around a briefcase full of cash, you want to make sure that you understand how payment is expected at closing. Personal checks and debit cards won’t be accepted for such a large transaction, so anticipate a trip to the bank to get either a cashier’s check or a certified check for the full amount. Wire transfer may also be possible, but that’s something best discussed well in advance with your title company and realtor.

Finally, you should always ask for a final walk-through of the home you’re about to purchase about 24-48 hours before the actual closing. Even though you’ve been through the home before, you want to make certain that the seller has completed any agreed-upon repairs and that the home is in broom-clean condition. You also want to make certain that nothing you expect to be in the home (such as appliances that were part of the deal) is missing.

What Happens When Closing Day Finally Gets Here?

Once you finally get to your closing day, however, events usually proceed rapidly. You should anticipate about an hour-long process from start to finish, although it may take a bit longer if there are any questions or concerns that need to be addressed by the parties.

Typically, the closing takes place in the title company’s office, and you will need to have:

• A photo ID for everybody who will be listed on the mortgage. The title company is required by law to verify your identity.
• Your cash to close in the form of a cashier’s check, certified check or proof of wire transfer.
• Your closing disclosure documents, so that you can compare the figures and costs to the actual mortgage papers and make certain they match.
• Proof of your homeowner’s insurance policy (your policy’s declarations page is typically enough but check with your lender or title company to be sure).

Once everybody is assembled and all the documents have been checked, you’ll be asked to sign many documents. 

While it’s tempting to just “sign on the dotted line” in a rush, it’s better to take your time and read through them. Some of the documents include the closing disclosure, deed, deed of trust (your mortgage) and note (your agreement to repay the lender or finance company for the mortgage, which also includes the total amount owed, interest rate and other particulars). These papers spell out your rights and obligations and will affect your life for a very long time, so don’t feel pushed to sign without reading.

As soon as the ink is dry on the last page, that’s it – you’ll get the keys to your new home! You’ll have completed the last steps of one journey and will start on a whole new adventure.