About the Closing Process

What does the term "closing" mean?

Closing, also known as settlement, on a property sale means legally transferring ownership from one party to another. This process culminates in the signing of contracts and passing over the keys from the seller to the buyer.

What are closing costs, and how much are they?

Closing costs are charges that are paid when the property changes hands. These costs cover services required to process the transaction, including title work, appraisals, inspections, document preparation, recording fees and other expenses. In many cases, there are also loan origination fees (charged by the loan officer to find the right loan and secure approval) that are part of the closing costs.

At closing, you typically pay 1% to 2% of the purchase price for "closing costs" and another 1% to 2% for "prepaid items." Closing costs usually fall into four primary areas:

1. Mortgage Cost: loan origination fee, points, document preparation, commitment fee, underwriting fees
2. Outside Vendor Cost: appraisal, credit report, flood determination fee
3. Total Cost: settlement fee, title/abstract search, title insurance premium (lenders policy – required and paid for by buyer), owners title insurance policy (Optional and paid for by buyer), plat drawing
4. Government Fees: title recording fees

Do I really need title insurance?

Buying a home or property is one of the biggest decisions and financial investments you'll make in your lifetime. Title insurance protects your claim to your property from potential problems caused by mistakes and irregularities that may have occurred in the past. Dollar for dollar, it's one of the most cost-efficient forms of insurance for property owners. It's relatively low, one-time premium covers you against legal problems that could cost tens of thousands of dollars and even the loss of your property.

How long does closing take?

Going through all the steps involved in a legal transfer of property varies from one sale to another, but traditionally most residential sales close in about a month. Signing the papers and handing over checks and keys will take about an hour.

Can I move into my new property on the day of closing?

Your date of possession is usually part of the purchase agreement and is often determined by local practices. On residential properties, it's challenging to close and move in the same day, and it can be risky to plan it that way. If a closing takes longer than expected or gets delayed by even a day, you'll find yourself pressed to manage the move and perhaps stranded between properties. And even if you could move that day, why would you want to? Why not take the rest of the day to celebrate your momentous purchase then get plenty of rest and handle the big move tomorrow.

What do I need to bring to closing?

Buyers and sellers both need a form of photo ID, such as a valid driver's license or passport. Any money you owe should be in the form of a cashier's check or can be wired to the Title Company.