Between Signing My Purchase Agreement and Closing: What’s Going On?

What goes on between the day you find your seller and the day the seller hands you the keys? If you’re new to home buying, you’ll be curious about each step. And if you haven’t closed on a home in a long time, you might want a refresher.  

Once you sign the agreement, a predictable series of events awaits you. While this series is different from place to place, there are a number of usual steps.

Let’s preview the journey, so you know just what to anticipate at every significant turn.

The Seller Has Agreed: I’m the Buyer. What’s Next?

Signing the agreement just opens the most exciting part of the journey. Now is when the professionals get to work on a timeline. It can take a month to 45 days to get to closing on your new mortgage. These steps are why:

Deposit Your Earnest Money.

Once you have signed a purchase agreement, your mortgage consultant will guide you through the financial steps. You’ll get an escrow account. You’ll use it for your payment to the seller. Funds will be released as you and the seller meet all of the agreement’s terms.

Typically, a buyer puts earnest money into the account so the seller knows the buyer is serious about closing. At closing, escrow money funds the down payment and other costs.

Get specific information from your agent about what other payments you’ll need to make, and what payment forms will be acceptable at closing.

Order the Appraisal.

You (or your mortgage consultant on your behalf) now must order an appraisal. It’s just one of the services you’ll pay for on closing day.

An appraiser’s task is to come up with an unbiased and fair figure for the home you’re buying. It assures you and your lender that you’re paying fair market value for your home (and what fair market value actually is). Local governments rely on the appraiser’s valuation to set their property tax charges.

Because appraisals are so important, you might have agreed to buy the home contingent on the appraisal coming in at the price you decided to pay. (For most buyers, it does.)

Paying in cash? You still may make your offer contingent on an appraiser’s confirmation of the property value.  

Attend the Home Inspection.

Once you have a signed contract, you (or your agent) will make an appointment with a home inspector.  You can make closing on the home contingent on a good inspection report.

If the inspector finds a serious problem during the inspection, now’s the time for your agent to negotiate with the seller to complete the repairs for the sale to go through. Your agent, speaking on your behalf, can ask that the seller for repairs, or request a price discount.

The typical purchase agreement lets a buyer walk away if serious problems show up and the seller won’t make them right.

Order the Title Search.

You’ll pay for the lender’s title insurance. Before producing a policy, a title company must check to see that the title is clear. Title agents sift through records pertaining to a given property.

If the title search shows clouds on the title, the title company works in the background to resolve the discovered claims.

What about a title insurance policy for yourself, not just your lender? Optional owner’s title insurance protects you against unseen risks to your ownership rights for so long as you hold the deed.

Get Through the Loan Underwriting.

If you’re like most buyers, you’ve applied for a loan. We’ll assume here that you’ve gone through the process and received pre-approval. Optimally, you have a supportive mortgage specialist as your guide.

Now that you’ve signed an agreement, is the loan pre-approval still good for the home you’ve picked out?

At this point, the lender revisits your loan application. The lender must verify your financial details, double-check your employment status, and assess the chosen property’s value. The lender wants to be confident that its collateral (your new property) is a sound investment.

Take Your Final Walkthrough.

Assuming the underwriter decides you and the home are good to go, you’ll hear just before closing that the loan is approved. But wait! Don’t skip the final walkthrough.

A final walkthrough is one last tour of the property before closing, to confirm everything is as it’s supposed to be. It’s a buyer’s last chance to get fixes or discounts for necessary repairs.

Attend Your Closing.

Big day ahead at your agent’s or the settlement agent’s office! It won’t take long (maybe under an hour) but expect to sign plenty of documents before finally receiving your new set of keys. At closing, funds will be released from escrow. You and your agent will attend, and your seller will be there or have a representative there. Once you sit down at the table, here’s what happens:

• You’ll give your official photo ID to the title company rep, or whoever is conducting your closing.  

• You’ll be handed the closing disclosure. Take care to review your closing costs and fees, and reviewing how the funds are about to be disbursed.

• You’ll review and sign everything that the closing agent describes and puts in front of you.

You’ll sign a packet of loan documents and a packet of title documents in the office. And the seller will sign the deed over to you, so it can be recorded. Explore more in this article:

Congrats on Closing! Now, How Will You Get Your Deed?

Understand What You’re Signing.  

There’s a near-universal temptation for buyers to rush through this. But you should at least know what papers will be zipping across the table for you to sign:

• The closing disclosure explains your loan and the costs and fees.

• Your title insurance package includes your title and survey documents.

• Your loan papers include the loan application, mortgage agreement, first payment documentation, and property tax information.  

• You’ll have a homeowner’s insurance policy, which should be ready to take effect upon closing.

• If your down payment is less than 20%, you’re likely paying for mortgage insurance (also known as private mortgage insurance, or “PMI”).

The seller will resolve any mortgage they might have at closing.

Welcome to Your New Home!

The closing company now sends the lender your closing documents. When the lender has approves the package, funds are released to pay of the seller’s mortgage and other liens against the home, and the seller gets the sale proceeds from you.

The title company will file your deed, mortgage, and related documents with the county recorder. After recording, the deed will be sent to you in the mail.

Practices may vary from one area to another. Your agent will be a fountain of location-specific information. Good luck, and may you enjoy your new home.