What You Need to Close on a House

After acquiring a mortgage offer from your financial institution, spending an extended period of time searching for a house, working through piles of paperwork, and finally putting in an offer, you’re about to close on your first home! Congratulations. This is a huge milestone. You (and your real estate agent) have worked hard to get here.

You have only one remaining hurdle to clear: the closing process. While this step does not require strategy or out-of-the-box thinking, it can feel tedious, if not complex, for first-time buyers. Fear not, though—your real estate agent will guide you through precisely what you need to close on a house.

Speak with your agent about when you should plan to move. It is common for closing to take one to two months to complete, but your agent will know if your situation is unusual in some way that will likely alter this timeline.

Closing Costs

Your total closing costs will include the fees and expenses you will incur during the closing process, including title insurance, homeowner’s insurance, hiring an attorney, and hiring a home inspector. These costs can be unpredictable, so work with your real estate agent to lock down an estimate. You must have these funds on hand before you dive in.

It’s Time for Your Documentation Again

The paperwork you were required to assemble to qualify for a mortgage pre-approval will be largely similar to the set you will be asked for to secure the loan. Now is the time to gather the following information:

•       Employment Verification
•       Proof of Income
•       W-2 and previous year’s tax returns
•       Complete list of assets and debts
•       Your credit history

Only once your lender has combed through your documentation will they move to approve your loan request. However, more information is still needed before that can happen.

The Home’s Inspection Report

Your lender will require a home inspection to decide whether investing in your purchase is financially sound. The report will uncover any issues with the home’s foundation, roof, plumbing, wiring, or overall structure.

If you, your real estate agent, or your lending institution are unhappy with any aspect of the inspection report, this is the time to negotiate with the seller. You can ask the buyer to either repair damage or adjust the price to account for the time and cash you will have to put in before you can take up residence.

Title Investigation

A title search guarantees that the property is not under a lien or dispute presently. Additionally, the buyer is usually responsible for taking out a title insurance policy to protect both themselves and the owner against legal trouble should any arise from the property’s title.

Some sellers will cover this cost, but this is rare. At best, you may be able to negotiate a shared burden of the cost of the insurance policy. Still, the precise split must be decided by the parties involved.

Homeowner’s Insurance

Before your mortgage can be approved, you will be required to present proof of a homeowner’s insurance policy. This policy protects you and your financial backer should anything happen to the investment, namely your home. For this reason, your policy has to cover the full value of your home.

State or Federal ID

You may not have questioned why you must present your official government-issued ID throughout the closing process, but there is more to it than just confirming your name and current address—though that is certainly a key reason.

Your state-issued ID card, driver’s license, or federal passport confirms the identity of all involved parties. If anyone is not who they claim to be, the transaction has been left wide open for fraud, covert criminal exchanges, and high-level identity theft.

Furthermore, the law demands that real estate transactions comply with certain regulations, one of which is the investigation of the identity claims of both buyers and sellers. Such regulations can be set locally but are certainly laid out in both state and federal laws.

Sadly, scams continue to surface, and the real estate industry is no exception. Whether it comes from overseas, or simply from US residents trying to benefit from lies, checking identities is a simple, yet effective, method to rule out the most common attempts to scam and defraud buyers.

As a buyer, you must be certain that the sellers have the legal right to sell this home. Otherwise, you will have to enter a prolonged legal battle to resolve your financial involvement, during which time you will almost certainly not be able to purchase another home as a primary residence.

The HUD-1 Form

This form is also known as a closing statement because it contains a full accounting of the costs incurred during this real estate transaction. It includes the mortgage amount, closing costs, adjustments, and the final purchase price. 

Before the day you’re going to close on the home, take the time to carefully review the HUD-1 form and compare it against your own documentation. This form must be accurate before you sign on the dotted line.

The Final Step

With every hurdle cleared, it is time for you to pick up the keys and take possession of your first home! Not so fast, now: you will need to inspect the property yourself to make sure the buyers have delivered the property in the agreed-upon condition. Do not take possession until they have done so.

We know how disappointing and stressful it can be to pick up the keys only to discover that the seller has not upheld their end of the bargain. Still, it is worth holding out until this final dispute is resolved. You want to take ownership under the best possible circumstances, and you deserve to do so.

The Takeaway

This list might feel daunting after all the work you have already done to find the right home for you. Now is the time to lean on your agent! They have the experience and information you need to guide you through to your goal.

When you have the keys and take possession of the property, you and your agent will be able to congratulate each other on the detail-oriented focus and determination it took to make it to this moment.