How Does Closing on a House Work? 10 Steps to Closing on a House

Key takeaways

• On average, closing on a home can take anywhere from 30 to 60 days. 
• The closing process includes mortgage approval, title checks, home inspections, and gathering required documents.
• Closing day involves reading through and signing paperwork before the title is finally transferred to you.

After the seller has accepted your offer on a home, you’ll begin the closing process. From submitting your mortgage application and ordering the appraisal to completing the final walkthrough and signing paperwork, there are several steps between offer and ownership.

In this Redfin article, we’ll outline 10 steps to closing on a house and what you can expect during the process. Whether you’re buying a house in Durham, NC, or a condo in Long Beach, CA, here’s what you need to know about closing on a home.

Documents you’ll need for closing on a house

There are four key documents you’ll encounter during the closing process. Here’s an overview of what you can expect from each:

1. Closing disclosure: Summarizes your final loan terms, interest rate, monthly payments, and a full breakdown of closing costs. You must receive this at least three business days before closing, and you’ll need to bring this document on closing day.

2. Seller’s disclosure: Also called a property disclosure, a seller’s disclosure outlines any undisclosed details about the home that may negatively impact its value. If the disclosure shows any major issues with the property, you may be able to back out of the deal without losing your earnest money. 

3. Title documents: The title documents verify the home’s owner and show if there are any claims or liens against the home.

4. Loan application: You’ll receive a copy of your loan application, which you can review. 

10 steps to closing on a house

The closing process finalizes the sales contract between you, the buyer, and the home seller. There are several steps to closing on a house, and knowing what to expect along the way can help prevent any delays. Let’s take a look through them.

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. They will hold it, typically in an escrow account, 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. Your earnest money is applied to closing costs, down payment, or other fees at closing. 

2. Complete your mortgage application

Once your offer 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’ll already have some of the documents you need for the 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. It will likely be a lot of the same documentation you provided during the pre-approval process. All of this information will be reviewed by an underwriter to ensure you qualify for the loan you’re seeking.

Avoid making big financial changes during this period. Opening new credit cards, financing a car, or making large purchases can affect your credit and delay or deny your approval.

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. Then they’ll 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 if 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 defects, electrical or plumbing problems, pest damage, or non-working appliances. 

A home inspection can also give you a heads-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 upfront.

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.

The inspection report helps you decide whether to request repairs, negotiate credits, or proceed as is. Your real estate agent can guide you on the next steps based on the findings.

5. Pay for an appraisal

A home appraisal is an unbiased professional opinion of a home’s value. It can help ensure that you’re not overpaying for the home. Your lender will likely require a satisfactory appraisal before approving your loan. They want to ensure the loan isn’t worth more than the home’s value. 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 of options. Your agent can explain your options based on what’s outlined in your contract. 

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 policy must be active before closing so coverage begins the moment 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. If you live in an area prone to flooding or fires, now is the time to purchase flood insurance and/or a fire insurance plan. 

Do I need a home warranty? A home warranty covers the repair or replacement costs for major home systems and certain appliances. It’s not required, but it can be helpful to offset the cost of unexpected repairs.

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. While your loan is being approved, it’s important to avoid any major changes to your finances. Once your loan is approved, you can begin the final steps of closing on your home. 

8. Do a final walkthrough

A final walkthrough ensures 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. If you and the seller agreed upon repairs, you’ll want to make sure these were completed.

Additionally, if appliances like the refrigerator, stove, etc., were to remain in the home, check that they’re still there. Finally, make sure the home looks like it’s in the same condition as when you last looked at it. You can use a final walkthrough checklist to make sure you don’t miss anything.

9. Gather your documents for closing on a house

The closing process is long, so you may be wondering when the actual closing happens. 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 certified or cashier’s check. You typically cannot pay with a personal check.

In some states, a real estate attorney will conduct the closing process. The closing agent or real estate attorney will send you a list of everything you need to bring to the closing. Often this includes:

• Government-issued photo ID
• Closing disclosure to compare to the final documents
• 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). If required, your real estate agent, real estate attorney, and the sellers may be present. There are also options now that allow you to do all of this online, called eClosings.

Take as much time as you need to read and understand everything before you sign. Some closing documents are written in complicated language, so ask your attorney or real estate agent if you’re not clear on anything. Many homebuyers take the day off work to ensure they have enough time to read through the documents.

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. 

FAQs about the house closing process

How long does it take to close on a house?

If you have a mortgage, then closing on a home typically takes 30 to 60 days. Sometimes, closing can be as quick as two weeks, but this varies. 

What can cause delays in a house closing?

Missing, incorrect, or late paperwork can cause delays in closing. Other common roadblocks during the closing process include low appraisals, credit issues, and problems verifying income and assets. 

How much are closing costs?

Closing costs are typically 2 to 5% of the home’s purchase price. It covers various fees, like taxes, insurance, and processing fees. 

What is cash to close?

Cash to close is the total amount you’ll pay on closing day. This includes your down payment, closing costs, prepaid expenses, and any funds required to set up your escrow account. Your earnest money is applied to these costs, including any seller or lender credits. 

What is an escrow account?

An escrow account is typically opened by a title or escrow company to hold your earnest money until closing. After closing, your lender may also set up a separate escrow account to collect funds for property taxes and homeowners insurance.

How long does closing day take?

Closing day takes approximately two hours to complete. You shouldn’t feel pressured to hurry, as you have plenty of documents to review and sign. 

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