Guide for First-Time Home Buyers: Surviving Closing Day
Navigating the housing market as first time home buyers can feel like solving a complex puzzle. Especially without a background in real estate or personal finance. Here’s everything buyers need to know before closing day so they can put pen to paper with confidence.
If you’re feeling out of your element, you’re not alone! In fact, 32% of homes sold in 2024 were purchased by first-time buyers like you.
We created a three-part home buying guide to demystify the buying process and empower first time home buyers to take confident steps toward homeownership.
In Part One (“Home Shopping 101”) and Part Two (“Submitting the Offer”), we walked through the crucial first steps of buying a home. It’s starts with finding the right realtor and mortgage lender. The next step is selecting a property that fits your needs and making a competitive offer. Finally, we discussed the important inspections that come once you’re officially “under contract.”
Now, the only thing standing between you and the keys to your new home is closing.
In this blog post, we’ll provide an overview of what happens during a typical real estate transaction closing. We’ll break down the different types of legal documents, closing milestones and closing timeline first time home buyers can expect.
Let’s jump in!
The Final Walkthrough
Usually within a day or two of closing, you and your realtor will have the opportunity to do a final walkthrough of the home you’re purchasing.
A final walkthrough is the last opportunity you have to evaluate the property before finalizing your purchase at closing. This should be done after all repairs have been made and the home is in broom-clean condition.
The purpose of the final walkthrough is to make sure that the house is in the same condition as when the offer was accepted, and that all agreed-upon repairs have been made. You will want to confirm that utilities are working and that there are no new issues with the property.
The final walkthrough should take thirty minutes to an hour. If there are any issues you need to address, don’t hesitate to spend more time.
Once you completed the final walkthrough, it’s time to finalize the purchase.
A Few Things to Avoid
The home-buying process doesn’t end until you’ve successfully closed on the property. While it’s tempting to make big changes in the weeks leading up to closing, here’s what you should avoid:
3 Financial Moves to Avoid Before Closing
Any major changes in your financial situation could give the seller cause to back out of the deal. Basically, if you want the home, don’t rock the boat.
What Happens on Closing Day?
Closing day is the when the property officially becomes yours.
Closing on a home usually takes place at the office of the title company or escrow agent. It can also take place at an attorney’s office or your lender’s office.
This is where all of the legal documents will be signed. You, the seller (or the seller’s attorney), and the respective real estate agents will all be present, as well as the escrow officer. The escrow officer’s job is to make sure that all of the necessary paperwork is in order and that both parties are satisfied with the terms of the sale.
RELATED POST: A Homebuyer’s Guide to Real Estate Closing Costs
Understanding the Legal Documents
What’s a Promissory Note?
One of the first things you’ll do is sign a loan document called a promissory note. This document outlines your obligation to repay your mortgage debt to the lender. You’ll also sign a mortgage document, which pledges your home as collateral for the loan.
A promissory note is a legal document that details the terms of a loan agreement. When you sign a promissory note, you are agreeing to repay the loan according to the terms laid out in the document. It will list the amount of money being borrowed, the interest rate, and the repayment schedule.
The promissory note will also state any penalties for late or missed payments. By signing it, you are agreeing to be held responsible for repaying the loan.
How Does Property Change Ownership?
The seller will sign a deed transferring ownership of the property to you.
A deed is a legal document that transfers ownership of real property from one person to another. The deed must be signed by the seller and delivered to the buyer. The deed must also be properly recorded with the county recorder’s office in order to be valid.
There are two types of deeds: warranty deeds and quitclaim deeds. A warranty deed guarantees that the seller has good title to the property and that there are no other claims or encumbrances on the property. A quitclaim deed does not provide any guarantees, but simply transfers whatever interest the seller has in the property to you.
When purchasing property, it is important to make sure that you receive a valid deed in order to avoid any problems down the road.
What to Bring to Closing
You’ll need to come prepared to pay the down payment, any outstanding liens or debts on the property, and closing costs, minus any earnest money deposit that was previously paid.
What are Closing Costs?
When you’re buying a home, there are many costs to consider beyond the price of the property. There are multiple parties involved in the transaction from start to finish, and service fees associated with each.
Here’s a look at some of the most common closing costs:
How do I Determine my Closing Costs?
As a good rule of thumb, expect your closing costs to be somewhere between 3% and 6% of your loan amount.
Your real estate agent or attorney can help estimate how much money you’ll needed at closing. The closing agent will provide you with a statement at least one day prior to closing (in some states it can be at least three days prior to closing) that lists all the specific charges and credits due.
Review this statement with your real estate agent and compare it to the Loan Estimate and Closing Disclosure forms to make sure there are no surprises. If you have any questions about the statement, ask the closing agent of real estate agent for clarification.
Most escrow or title companies will not accept personal checks or cash, so it’s important to have all the necessary funds available in the form of a cashier’s check. Remember to also bring a government-issued photo ID.
Receiving Keys to Your New Home
Once all the paperwork and payments are finalized, you’ll receive the keys to your new home. At this point, you can begin moving in!
Check out Part One “House Shopping 101“ and Part Two “Submitting the Offer“ for all the info you need to reach this exciting milestone!
This post is all about navigating the closing process as first time home buyers.
