Navigating the Closing Process of Buying a Home
breaking down the steps
Are you in the process of buying a house and feeling overwhelmed by the closing process? We'll break down the steps involved in closing on a house purchase. We'll also cover important terms and items to review before closing day, so you can feel confident and prepared.
More of a reader? Catch the video transcript below!
So, what really goes down at closing? Most first-time homebuyers understand the process of house hunting. They understand that you write an offer, have an appraisal done, and get the home inspected.
But where it starts getting a little murky is…what happens at the end?
How does the thing actually close?
So, today we’re going to talk about four things that happen at closing. We’re talking about what the lender does, what the title and escrow companies do, what you do, and then what it means to actually close.
Ready? Let’s jump in.
What does the lender do at closing?
Within a few days of closing, the lender will issue a closing disclosure.
This is a document that shows everything about the loan — how much money you’re borrowing, the interest rate, whether there are prepayment penalties, and whether taxes and insurance are impounded and made part of your loan, among other things.
You’ll then have a chance to review everything and give your signoff. Once you approve the closing disclosure, then the lender is going to draw up a loan doc called a promissory note. This is the actual contract between you and the lender that basically says, “I’m going to pay you this much in these installments at this rate.”
They’re also going to have you sign the deed of trust. The deed of trust is a document that’s recorded with the county that basically says that the lender is entitled to their money back before anything happens to the property.
They are also going to verify that you have a job. They will do a final verification of employment right before you close because if you have a job the whole time and then lose it at the last minute before closing, they will not fund the loan.
What do the title and escrow companies do at closing?
The title company will make sure everything is clear with the title — no pending lawsuits, no seller issues, no buyer issues, etc. In the case of a new construction home, they’re also going to be making sure that all the subcontractors got paid so that the subcontractors don’t show up and try to put a lien on the property for unpaid work.
At this point, you’re in touch with title and escrow, your agent, and the lender and signing last-minute documents including the note, the deed of trust, and other paperwork, and then wiring the remainder of your closing costs.
This is where escrow comes in. Escrow is going to do a final check-in with the title company and the lender to make sure that everything is good to go for closing day. Then, they’re going to ask the title company to release the deed for recording. This means the deed of trust and the grant deed. The grant deed is the document that actually transfers the property from one person to the next.
The title company will then pass the grant deed and the deed of trust to a courier who takes them down to the county recorder’s office to give their stamp of approval on the documents.
Once we have confirmation that they’ve officially been recorded, that’s when the deal is closed!
What do you do at closing?
You are essentially going to sign the biggest stack of paperwork you’ve ever seen in your life, and then meet with your agent, get your keys, pop your champagne, and move your stuff in!
…and then the water heater goes out. But that’s a video for another day! 😉
Brent Edwards (aka Brent the Broker) is a residential real estate agent and Realtor in San Diego, CA who helps clients buy and sell homes in San Diego, California and all surrounding areas. Brent is a highly-recommended Realtor in San Diego by family, friends and past clients. Call Brent today at 619-550-8070 if you have any questions about real estate in San Diego or you'd like to buy or sell a home.
