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How to close on a house, from start to finish

So, they accepted your offer. Now what?

ILLINOIS, USA — So, they accepted your offer. Now all you can think about is moving into that perfect house you spent so much energy finding and researching. It’s finally time to move in! Or is it…

Let’s get this out of the way now, it will be a few days until you have the keys and free reign of your new castle. If you’re like most home buyers and need to use a mortgage, it will be a few weeks until move-in day.

There are several things that still need to be done before move-in day, and even before COVID-19, the process could be confusing and complicated.

Luckily you have a great real estate agent and team to help you through it (you do have one, right?)

Before the closing meeting can be scheduled, Ruhl & Ruhl realtor Kendra Mulcahy says these keys steps must be completed:

• Finalize the purchase agreement

• The home inspection needs to be approved

• The appraisal of the home needs to be scheduled

• The mortgage application should be completed and approved (Pre-Approval)

Ok, that’s all out of the way, the meeting is scheduled. What happens at the closing?

The closing is the day/meeting where you sign all the required paperwork and become the official legal owner of the house. The period between the seller accepting your offer and the day of closing is called escrow, a phrase you may have heard before.

How long does it take to close on a house?

The realtors we interviewed agree, the average length of the closing process from start to finish is 30-45 days. 

The clock starts ticking the moment you submit the mortgage application. That number can be significantly reduced if you have a bigger down payment or pay with cash since most of that time comes from the mortgage lender. Senior Mel Foster realtor Josh Kilpatrick says roughly 25% of clients pay for homes with cash.

According to Kilpatrick, if you pay with cash the process can be done in as little as 10 business days.

As you enter the escrow phase, your agent will help facilitate the next several steps which should add up to that 30-45 day time estimate.

Consider your specific timeline The buying process takes anywhere from 9-22 months. In addition, it takes 45 days on average to close on your home purchase after an accepted offer. That means that it will be very important to understand when you would like to be in your new home and then work backwards.

These steps include:

• Completing the home inspection

• Seller completes repair requests (if any)

• Mortgage application and underwriting completed

• Appraisal completed showing value at or above the approved mortgage amount

• Acquire homeowner and title insurance

• Mortgage is approved

• Do a final walkthrough

• Attend your closing meeting (or let the attorneys handle it) and close on your new home

If the appraisal comes back at or above your offer/approved mortgage amount, the lender will send the “clear to close” about a week before the date of the closing meeting. 

If the value comes back as less than the agreed offer, your bank may refuse to loan any more than the appraised amount. You will need to cover this difference with cash or renegotiate. In a strong market don’t expect the seller to renegotiate, they may move on to the next buyer.

At the actual meeting, expect the process to take 1-2 hours on average. However, Ruhl & Ruhl realtor Michaela Rovinski says it can be as little as 30 minutes. 

The amount of time the meeting will take depends entirely on the complexity of the transaction and whether a mortgage is involved. Both buyer and seller will be signing stacks of forms during this final stage.

Often the whole closing meeting process is handled by attorneys so you might not even need to attend the final meeting. This may vary based on your state. 

What documents are signed at the closing meeting?

Mulcahy says to expect to sign many different documents on the day of your closing, including:

• Title (The Deed) Transfer: This document transfers the ownership of the home from the previous owners to you.

Truth-in-Lending Statement: This document details the fine print of your mortgage loan, and your mortgage company by law is required to provide you with it at the closing.

Title Insurance: Title insurance protects you as well as your lender from any issues regarding the title of your home.

Mortgage Loan Documents: These documents will finalize the approval of your loan and will give you the necessary financing to purchase it. 

Home Owners Association documents (if applicable)

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How is COVID-19 changing the process?

Kilpatrick and Mulcahy tell WQAD that precautions are taken during the closing meeting like sanitizer and masks. 

As for COVID’s effect on the market, both experts say houses are going for asking price and low-interest rates are making it easier for people to buy homes. Good for sellers and buyers!

What do I need to bring to the closing?

Double-check with your agent or attorney on what exactly you need, but most closings will require the same documents.

Experts recommend you bring:

Identification will be needed at the closing: A government-issued identification card such as a driver’s license or a passport. In some cases, two different forms of identification are required.

 Additional paperwork may be required at the closing, such as proof of homeowner’s insurance, the results of a home inspection, and other legal documents needed for the transaction.

Your spouse should be there if you are married. Your spouse will need their I.D as well.

A cashier’s check should be brought to the closing in the total amount of the down payment and closing costs. If you went through a mortgage lender, they will provide you the final amount prior to the closing. If you’re paying with cash, you can skip that step. A wire transfer is also usually accepted if you wish to avoid the cashier's check.

How much is this going to cost?

Closing costs will be about 3% of the total home price (mortgage amount) according to the real estate experts we interviewed. But it’s possible there will be straight costs of around $500-$1000 as an average. In Illinois and Iowa buyers don’t pay the realtors, the sellers do. However, this can vary based on state or negotiations.

Do you need an accountant’s services if you buy/own a home?

Certified accountant Victor Flores says no, you don’t need an accountant if you fall into the category that most Americans do. That is, you take the standard deduction on your tax return. However, your situation could be different, and you should always check with an accountant if you have questions.

What are closing problems that could cause delays?

The real estate experts say there are many factors that could lengthen the process. 

Common issues include:

1. Inspections not being completed, or big issues not being fixed that were negotiated. Deal breaking issues include structural problems, water damage, electrical, roof damage, plumbing, and insect or pest infestation.

2. Natural disasters or weather events. A great example is the Derecho.

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3. Changing jobs during the escrow process (Mulcahy says a similar job isn’t that big of a deal). 

4. A low appraisal, banks won’t lend more money than a home is valued at. it’s very common for homes to be appraised for a different amount than was agreed between buyers and sellers.

5. Making big credit-based purchases such as cars or furniture that might lower your credit rating. 

6. Home sale contingency, there will be delays if your contract states that your previous home needs to be sold before you can officially purchase the new one

7. The realtor not providing the proper paperwork to attorneys or banks. (yikes)

8. Homeowner’s insurance, proof that you have a homeowner’s insurance policy on the property you’re buying is required.

9. Not keeping up on requests and paperwork, respond to all information requests from lenders and attorneys as quickly as possible to keep the escrow process moving forward.

Ok, everything is signed! Can you move in on the same day as the closing??

Experts tell WQAD that yes, the home is officially yours! They should hand you the keys after the closing meeting and now you’re done! You can move in right away. Congratulations and enjoy the home.

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Sources used include licensed Illinois and Iowa realtors Josh Kilpatrick, Michaela Rovinski, and Kendra Mulcahy. Also interviewed is certified accountant Victor Flores.