Buyer's Guide to Closing on a House

So, you've figured out what you want in a home, scoured listings to find the right property and gotten a seller to accept your offer. Congratulations! You're in the final stretch of the homebuying process.

Seven steps for closing on a house

Before you cross the finish line to homeownership, you'll have to go through the process of closing on your new home.

While closing—also called settlement—is the last of many steps in the homebuying process, there's a lot that should happen between the time your offer is accepted and the moment you get the keys to your new home.

We've outlined seven steps for closing on a house, plus helpful tips for speeding up the process and protecting yourself along the way.

1 Arrange for a home inspection

To avoid any unexpected surprises, you should have a licensed home inspector scrutinize the property from top to bottom.

The inspector may provide a written report—typically with photos—detailing any flaws with the property. Your real estate agent then helps you draft a proposal for the seller.

Based on the severity, urgency and cost of each finding, you may be able to negotiate a lower price or ask the seller to make repairs. Note that some repairs are required by law, such as those needed to fix building code violations.

2 Get the home appraised

If you're applying for a mortgage, the property likely needs to pass an appraisal—an assessment of value by a neutral third party—to make sure the house is worth the agreed-upon sale price. Doing so mitigates the lender's risk.

During the appraisal process, an appraiser views the home in person to assess its condition. The appraiser determines the home's value based on multiple factors, including its location, its age, its condition, any improvements that have been made to the home and the recent sale prices for comparable homes in the area.

What happens if the appraised value is lower than the offer?

If the appraiser's valuation is the same or higher than the sale price listed in your purchase agreement, the appraisal is satisfied, and you're one step closer to getting your loan approved.

However, if the appraised value of the home is lower than what you've agreed to pay, there are several possible solutions. For example, you may:

• Persuade the seller to lower the sale price
• Split the difference between the appraised value and the price with the seller
• Come up with the difference out of your own pocket

Depending on how your purchase agreement was structured, you may also have other options—such as the option to walk away from the sale.

3 Purchase title insurance

Before you close on the home, your lender may require you to purchase lender's title insurance—a policy that protects them against any claims of ownership from other parties in the future.

Prior to issuing title insurance, a title company performs a title search, where they trace the property's ownership history by reviewing deeds, wills, trusts and public records.

If the title is clear, your next step is to purchase title insurance for your lender. There's also a second type of title insurance, called owner's title insurance, which is optional. It protects you, as the homeowner, from any other claims of ownership in the future.

How much does title insurance cost?

Combined, both lender's title insurance and owner's title insurance typically cost anywhere from 0.5% to 1% of a home's sale price.

4 Purchase homeowners' insurance

Most lenders require you to show proof of insurance coverage before settlement. Many lenders expect you to purchase a policy that insures your home for 100% of its replacement cost, so your home may be rebuilt if disaster strikes. But some may be okay with less coverage—for example, a policy that covers the balance due on your loan or 80% of the insurable value of the home, whichever is greater. You may prefer to buy a larger policy, so you're not on the hook for big out-of-pocket expenses should disaster strike.

Once you know your lender's requirements, an agent or broker helps you determine how much homeowners' insurance to buy.

5 Respond to loan underwriting requests

Next, your loan must go through the underwriting process. This process entails a professional underwriter thoroughly reviewing your finances, including your income, credit score and debts to make sure your financial situation everything meets the loan requirements. To keep the process from stalling, it's important to respond quickly to your lender's requests.

At least 3 business days before the settlement date, your lender is required to provide you with a closing disclosure form detailing all final terms and costs.

6 Conduct a final walkthrough of the property

Do a walkthrough of the home with your real estate agent shortly before closing—typically the day before or the morning of settlement. This is your opportunity to make sure the property is in the same or better condition than it was when your offer was accepted.

What to look for in a final walkthrough:

• New damage to the home
• Agreed-upon repairs that haven't been made
• Broken or missing appliances or fixtures
• Personal items left in the home
• Garbage or debris left inside or outside of the home
• Mold or evidence of water damage that you didn't notice before
• Broken locks or windows

What if there are issues at final walkthrough?

If you spot any issues during your final walkthrough of the home, your agent should alert the listing agent. In most cases, the seller compensates you for the unmade repairs at closing. In some cases—though it's unlikely—you may have to postpone closing to resolve the issue.

7 Sign legal documents and make a payment

It's the final leg of your homebuying journey—closing day! This last step involves meeting with a closing agent—often a representative from the title company—to sign paperwork to make the sale official. This paperwork includes the deed, the promissory note—promising the lender you'll pay back the loan—and other important documents.

Many closings today take place virtually, but some states still require buyers and sellers to sign in person—and some buyers simply prefer to meet with a closing agent face-to-face.

Documents to bring to a closing include:

• A government-issued photo ID, such as a driver's license or passport.
• Proof of the wire transfer that you made to cover your closing costs. Some closing companies accept cashier's checks.
• Proof of home insurance if you haven't already provided it to your lender.
• Your checkbook, in case there are any small last-minute changes to your closing costs.

Once you and the seller have signed all the documents, you get the keys to your new home. Welcome to homeownership!

How long does it take to close on a house?

If you're paying cash for a home, you may close fairly quickly. You'll likely still want to complete a home inspection, an appraisal and a title search, but settlement may happen as soon as you're satisfied with those outcomes.

Getting approved for a mortgage is the lengthiest part of closing on a house. It can typically take up to 60 days to close on a house according to Zillow.

How to speed up the closing process

Speeding up the closing process benefits buyers in a few ways—not the least of which is getting access to your new home sooner.

Also, expediting the process may ensure settlement occurs before the lock-in period on your interest rate expires. Essentially, closing ahead of schedule may act as an extra layer of protection between you and any potential interest rate increases.

Here are four strategies that may help you fast-track your loan approval and avoid closing setbacks.

Get preapproved before you make an offer

To get preapproved for a mortgage, you should provide a lender with detailed information about your finances and credit history. Doing this in advance should make it easier—and faster—for your lender to make a final approval decision. We offer several types of mortgages and you can learn more about the products and the preapproval process from our mortgage category page.

Maintain the status quo

"Opening a new credit card, making a major purchase—such as a car—or quitting your job while you're under contract could interfere with your loan getting approved," warns Maggi Bryant, a mortgage banker and vice president at First Citizens. "If possible, wait until after closing to make these kinds of changes."

Check on home repairs

If the seller agrees to make repairs, don't wait until the final walkthrough to confirm with the listing agent that they've been completed.

Watch out for scams

"Real estate wire fraud is a big problem," Bryant says. According to the FBI, real estate wire fraud is quickly becoming one of the most prevalent scams, with reported losses from cyber crimes in real estate (PDF) totaling nearly $397 million in 2022. Fraudsters intercept emails between the buyer and their closing company to trick victims into wiring money to an account they control. As a measure of protection, Bryant advises buyers to contact the closing company by phone to confirm wiring instructions.

Key takeaways

• The closing process involves a series of tasks that buyers must complete before they may take ownership of a property.
• The steps for closing on a house include a home inspection, an appraisal, purchasing title and homeowners insurance, loan approval, a walkthrough and transfer of ownership.
• Loan approvals take time, so quickly responding to your lender's document requests is essential.