What happens during the closing process?

Congratulations! You’ve had your offer accepted. Now what?

The only thing that stands between you and your new home is the closing process, which can be a very hectic, intense period. When you submitted your purchase offer, you likely set an aggressive closing date to make your offer more attractive to the sellers. Ensuring that you’re in a position to close on that date will require being responsive to requests, staying on top of the process, and ensuring your bank sticks to their timing (if financing the purchase with a mortgage).

Escrow agent and initial deposit

The “quarterback” for the closing process will be the escrow agent, also known as the title agent. They are responsible for ensuring that each party has fulfilled their obligations before any money is dispersed or the title for the home is transferred. They are the independent 3rd party that is the intermediary between the buyers and sellers.

The seller will generally select the escrow agent before the offer is accepted, and you will be notified of the escrow agent once your offer is accepted. Once the escrow agent has set up an escrow account, you will need to wire your initial deposit amount into the escrow account. The amount of the initial deposit is generally 3%, and would have been specified in your purchase offer. The initial deposit general has to be wired within 3 business days from the offer being accepted.

Finalizing your mortgage (if applicable)

The item that causes the most closings to miss their closing date is the financing. It is extremely important to connect with your bank as soon as your offer has been being accepted, as is ensuring that your mortgage agent is crystal clear on your desired closing date.

To finalize the mortgage and to fund your loan, your bank needs to complete (1) their underwriting of your creditworthiness as a borrower, and (2) their underwriting of your home as collateral for your mortgage.

To complete their underwriting of you as a borrower, your bank will need document your creditworthiness. This may entail submitting your latest paystubs, tax returns, bank statements and brokerage statements. You may also need to provide written documentation of any large inflows or outflows of cash to your bank account. Your mortgage agent should inform you of exactly what you need to provide, and it is good to regularly confirm they have everything they need from you to complete the underwriting.

The bank will also need to underwrite your new home as collateral for your mortgage. This involves appraising the home’s value, which is completed by an independent appraiser. You may need to coordinate with the sellers to confirm a convenient time for the appraiser to visit the home. Your bank will also require you to purchase homeowners insurance, which can be done through most major insurance companies like GEICO, Progressive, Allstate, etc.

Clearing title

While your bank is working through its final underwriting, the escrow agent will be producing a final title report, ensuring it is clear of any liens (amounts borrowed against the home). <something about getting title insurance and the bank getting title insurance>

Wiring the remaining funds

A few days before the closing date, you will wire the remainder of the funds to purchase the home. The escrow agent will be able to provide you with the precise amount, which will factor in your mortgage amount, as well as any fees or taxes that have to be paid at close. Your personal bank will be able to execute the wire for you, and you may have to visit the bank in person to initiate the wire of this amount (your bank can confirm). If you need to liquidate assets to fund the downpayment, it is good to do this as soon as possible to ensure that funds have time to clear and be deposited in your bank account before you need to wire the funds.

Signing documents

A couple of days before the closing date, you’ll sign your loan documents (if applicable) and paperwork relating to close of escrow and funds transfer. This signing will generally happen at the escrow agent’s offices. You’ll need to bring your ID (driver’s license or passport) for this signing. The escrow agent will guide you through the document signing.

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