Real estate closing steps to closing on a house

Real estate closing steps to closing on a house

If you are new in real estate business, you probably heard about the term “real estate closing”. It is something that experienced real estate agents refer to when they are shopping for a property. What does it mean to close on a house?

The real estate closing process occurs when you finally sign the papers that officially make the property yours. It is not that complicated after all, right? Well, prior to that, a real estate agent has a long list of things to do.

In the text below, we will explain to you what you can expect during the closing process – from the moment the property owner accepts you offer to the moment when you get the keys, and show you how to close on a house!

A quick glance at the house closing process routine

The first step in the home closing process is settlement, during which all of the paperwork needed to complete the transaction is signed. It usually takes place in an office with both buyer and seller at the same table, but sometimes each party will sigh separately.

After the title to the property is transferred from seller to buyer, the buyer receives the keys, and the seller receives the payment. From that payment, the closing agent subtracts money to cover the existing mortgage and other real estate transaction costs.

Note that all the deeds, loan papers, and other documents are prepared, signed and filed with the local property record offices. For your peace of mind, know that what happens at a house closing is recorded!

Now that we know the basics, it is time to dive into more serious steps to closing on a house.

Step Zero: Check your finances

Before you jump in the process of buying a house, there is a crucial step that many don’t make, and that is gathering your financial information for your mortgage application. Start with acquiring recent tax return and a couple of months’ worth of bank investment statements.

Next thing you should do is to make it easy for the lender to identify the sources of deposits on your bank account. Keep records of where you received the cash that’s on your account!

Get yourself an Escrow

For those of you who do not know what an escrow is, it is an account held by a third party on behalf of the two sides in a transaction (for example, a buyer and a seller).

It provides a neutral party which holds all the money and the documents related to the transaction until the house closing. Escrows are a great way to assure that both parties will not be ripped off or scammed.

Title Search and Obtain Title Insurance

Can you name a more iconic duo in real estate world?

You as the buyer should hire a title company to check the property’s chain of ownership if there are any individuals or entities that have claims on the property’s title. If there are some third-party claims to the title, the company works to resolve them before preparing the new deed that transfers ownership from the seller to the buyer.

Title insurance provides you insurance against financial loss from defects in title. Basically, it covers any financial loss that might happen if third-party tries to claim the title as theirs (spurned relatives, tax collectors who were not paid and so on).

Hire an Attorney

We strongly suggest that you get a professional legal opinion on your closing documents. Of course, it is optional, but keep in mind that even the most educated people cannot completely understand their closing documents.

That is why we have real estate attorneys – they understand those documents, know where to look for potential problems, and can spot possible red flags in your paperwork.

Be already approved for a mortgage

Being one step ahead can help you close the deal quicker! Now, getting pre-approved for a mortgage is not a requirement when purchasing a property, it shows to the seller that you are serious about the purchase and that you have strong financial backing.

Additionally, it can give you more bargaining power for your next step…


As with everything, closing a home comes with its costs. Now, of course, the escrow company and the attorneys have to be paid, but what about those junk fees that you may have heard some real estate agents mentioning. What are they exactly?

When you look at administrative fees, application review fees, appraisal review fees, ancillary fees, email fees, processing fees and settlement fees, they all increase your closure cost. By speaking up and standing your ground, you can usually get rid of most of these.

Pest Inspection is a must

Having a pest inspection is completely separate thing from the home inspection. When closing on a house, you must make sure that it is not infested with wood-destroying pests such as termites or carpenter ants which can breed out of control and cause expensive destruction.

If there are any, even the slightest pest problems, the mortgage company will require that the problem is solved before you can close.

Necessary Appraisal

After the pest control, the lender – in case you took debit instrument to purchase the property – must hire an appraiser to determine the market value of the property. Why? Because the appraisal ensures that the property is worth at least as much as the loan amount.

If it is not, the lender will not approve the loan unless the buyer makes up the difference by paying with cash.

Other inspections

It is mandatory that you make various inspections around the property to determine that everything is as it should be. Structure, plumbing, heating, air conditioning and electrical systems must be in pristine condition.

If you think that someone else might take over the property you are interested in, don’t worry. The sales contracts allow you to complete all kinds of inspections within the given amount of time.

Required Homeowners Insurance

On the side note, and this might be bad news for someone, some lenders require that the buyer must have homeowner insurance as a condition for loan approval. Makes sense, right?

Well, in some cases the buyer must pay several months’ insurance premium (or even the whole years’ worth) into an escrow account on the closing day.

Bank Clearance

Getting approved for a loan can take a while so do not worry! The closing date is just around the corner.

HUD-1 Statement

The closing agent from the title company or a real estate attorney prepares a HUD-1 document which is essentially the closing documents for the buyer. It accounts for and shows how much the seller will profit from the sale, and the amount the buyer must pay at the moment of closing.

Closing Day

As we already covered, the two parties meet and sign the documents, and that is it! The buyer now becomes the owner of the property, and the seller receives the agreed payment.

Ending thoughts on a real estate closing

The closing process may look complicated and stressful, but really the worst part of it is the waiting. Most of the time you will be waiting for someone else involved in the transaction to do his or her job.

And in the end, when you get the keys, you will realize that the wait was worth it.

If you enjoyed reading this article about real estate closing, you should read these as well:


Houzez Staff

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