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Closing on a house: What to expect and how to prepare

Yahoo Personal Finance· Getty Images
Hal Bundrick
Updated 3 min read

Closing on a house is the signing ceremony officially transferring ownership of a property from the seller to the buyer. For a first-time home buyer, it might seem a bit overwhelming, especially if you don't know what to expect.

How much are closing costs? How long does closing on a house take, and what are the steps to getting the keys to your new home?

Here are the answers to those questions and more.

Read more: How to buy a house in 2024

Also known as settlement, closing on a house is a legal meeting, in person or virtually, where paperwork is signed, certified funds are exchanged, and the seller is paid in full to allow the property's ownership to be transferred to the buyer.

The closing documents are likely to address:

  • The "free and clear" transfer of ownership. That means the title to the property has no unknown claims, such as tax liens, pending lawsuits, judgments, or outstanding loans.

  • The financial details of the purchase, shown in a loan estimate and closing disclosure.

  • The loan application and agreement if the buyer is financing the purchase.

  • The details of the ownership transfer and any collateral held as security for a loan in a deed of trust, mortgage, or promissory note.

  • Financial obligations related to the escrow account for the good faith deposit, down payment, insurance, taxes, and other required ongoing expenses.

  • Proof of homeowners insurance.

Read more: What is a real estate transfer tax and who pays for it?

In typical home sales, both the seller and the buyer pay a portion of closing costs. Sellers can expect to pay from 1% to 3% of the purchase price in closing costs, while buyers may pay a 3% to 4% share. On a $300,000 home, that would mean $3,000 to $9,000 for the seller — and $9,000 to $12,000 for the buyer.

Closing costs usually include:

  • Real estate agent commissions (often paid by the seller).

  • Mortgage points and origination fee.

  • A home appraisal and home inspection fee.

  • Title search and title insurance.

  • Deposits into an escrow account for taxes, insurance, and HOA fees, if applicable.

  • Numerous miscellaneous fees that might include court recording costs, attorney's fees, and a charge for obtaining a credit report, among others.

Tip: You can negotiate closing costs. Whether you or the seller pays for a particular item, or if you can earn a discount or fee waiver on a service, it's a matter of bargaining — and how competitive the home market is where you're buying.

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From submitting an official mortgage application to closing day can take from four to six weeks. Freddie Mac, a government-sponsored company that provides capital to the mortgage market, pins down that average time to closing at 43 days.

Read more: What all the best mortgage lenders have in common

  1. Submit a mortgage application and all requested documents for lender approval.

  2. Confirm an appraisal of the home has been scheduled.

  3. Hire a home inspector to go over a home inspection checklist and identify any issues with the house that might be addressed by the seller.

  4. Shop for homeowners insurance and arrange for it to go into effect at closing.

  5. Get approved for a mortgage. About midway through the process you will learn if your loan application has been approved. If so, congratulations! It's important to keep your loan approval intact by holding off on additional spending or taking on new debt.

  6. Hire a closing agent, title firm, or real estate attorney to conduct the closing.

  7. Review the closing disclosure that you'll receive three days before closing. It provides all of the financial details of settlement.

  8. Prepare certified funds or wire transfers for the closing costs and escrow account.

  9. Schedule a final walk-through of the house.

  10. Bring required documents, methods of payment, and personal identification to the closing. Sign and get the keys to your new house.