Imagine this: You’ve found your dream home, and a seller has accepted your offer. Congratulations, you’re one step closer to becoming a new homeowner! You’ve probably worked hard to find a good interest rate and type of home loan for you, maybe even with the help of a lender — all while staying within your pre-determined budget. You’re also probably curious about what comes next as you get closer to closing on a house. Now it’s time to finalize your mortgage, take ownership of the home, and reap the rewards.
So, what exactly does closing on a house entail? What’s the best way to tackle estimating closing costs (and how much are closing costs anyway)? Keep reading for some insight into closing on a house, plus what you should expect before signing on the dotted line.
Closing On A House, Explained
Closing is the pinnacle of your mortgage journey, when it’s finally time to sign all of the necessary documents that finalize your home loan. The first documents you sign will relate to your mortgage and loan per the terms agreed upon between you and your mortgage lender. At this point, you will accept the terms of your loan.
Generally, you will also sign documents during this meeting that transfer legal ownership of the house to you. If that does not occur during the mortgage closing, then you can set a date to finalize the process with the seller, lender, and anyone else who should be present.
Since you are finalizing so many important documents, closing on a house can be a stressful time during the home buying process. Keep in mind that you should closely review all documents and take this time to ask any and every question you have before you sign.
How Much Are Closing Costs?
According to NerdWallet, closing costs amount to 2% to 5% of the cost of your loan. Here’s where to read more from Mr. Cooper about various types of closing costs, which might help you in estimating closing costs based on your unique financial situation.
Consider inviting an attorney to your closing for help with anything that may come up during that last home stretch — especially any financial obligations or details. (Note: Several states require the physical presence of an attorney during closing.) Since you are dealing with two sets of very important documents during this time, take the time to ensure that you understand exactly what terms you are agreeing to by signing. With both the mortgage documents and the documents transferring home ownership, an attorney could be of assistance.
Steps of a Mortgage Closing
By the time of your closing, you have likely completed a home inspection and dealt with any issues that might have come to your attention. You have likely contacted a home insurance provider to buy any required insurance coverage.
After you have reviewed the mortgage closing documents, you will agree to the terms of the mortgage. This is typically known as a mortgage note. You will also sign a Closing Disclosure that addresses the loan terms.
Next, you will sign the home deed. This is the legal document that officially transfers ownership of the home from a seller to a buyer. Just as with the mortgage documents, review the deed closely to make sure all of the details are accurate.
Finally, there might be payments made depending on closing costs. As a buyer, you may owe the lender money for escrow or additional costs.
When all of these steps are complete and you have signed all loan documents, you can finally receive the keys to your new home! But don’t let excitement get the best of you, and try not to rush the process. Being as thorough as possible to get a good understanding of the terms of the loan, the rates, and everything about the home you are purchasing is your best bet.
Whether you’re buying your first home, selling a longtime home, or refinancing an existing mortgage, Mr. Cooper can help at any stage of your homeownership journey.