Once you have finally located the home of your dreams and negotiated the purchase price, it is time to go through the home closing process. At the closing, the title or deed to the home will be transferred and any mortgage documents signed. Typically, closing on a home will entail the review and execution of numerous legal documents. A home closing will also usually incur significant fees. A better understanding of the home closing process and the fees you may need to pay will make you feel more comfortable when the time actually arrives to participate at your own closing.

Your Better Homes and Gardens Real Estate agent will go over most of the fees and costs associated with closing on a home before you put in an offer. Many closing costs can be paid by either the buyer or the seller. Because of this, which party will pay the closing costs is commonly an important part of the negotiating process for the purchase of a home. If you will be financing the purchase with a mortgage loan, you will need to make sure to obtain all the appropriate loan documents before you can close on a home.  The lender must provide you with a good faith estimate of the costs associated with the loan within three days of your completed application. While the actual cost will vary widely, some of the common costs that must be paid on the day of closing include the following:

  • Loan Fees—These may include a loan origination fee, points, appraisal fee, inspection fee, credit report fee, insurance application fee, and an assumption fee
    • Insurance Premiums – Mortgage, hazard and flood insurance premiums are often required to be paid in advance
    • Reserves – A lender may require you to deposit funds in an account to ensure payment of future tax and insurance obligations
    • Commission Fees—Paid to your agent for services rendered
    • Closing Costs—Agent’s fee for preparing the documents and presiding over the closing, title search fee, notary public fee, attorney feesThe actual closing on a home typically takes place at an attorney’s office, title company or escrow agent’s office; however, laws and customs vary by state and even by areas within a state. The closing agent will begin preparing for the home closing process once an offer to purchase has been accepted by the seller. The first step is generally to request a title search. This checks the history of the property through public records and looks for any potential defects in the title such as a tax lien or judgment attached to the property. The closing agent will then draft all of the legal documents needed to transfer ownership of the home from the seller to the buyer. A HUD-1 Settlement Statement will also be prepared. This important document outlines in detail all of the costs associated with the home closing process for both the buyer and the seller.

On the day of the closing, both the buyer and the seller, along with their respective real estate agents, will appear at the closing agent’s office. Numerous documents will be reviewed by the parties and signed. Once everything has been signed, the transfer of the property from seller to buyer is complete and the closing is finished.