Guide to the Loan Closing Process

Guide to the Loan Closing Process

Once a buyer and seller have agreed upon and accepted an Offer on a home, the closing process begins.  The closing process typically takes 30 to 45 days to complete and includes everything from depositing funds, coordinating and satisfying all contingencies in the Offer, and the preparation of the various documents required to be signed throughout the transaction.

Here is a visual of the whole process from beginning to end.

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Staying Organized and in Communication with you

The closing process involves many steps, but your SMC Real Estate agent’s job is to make those steps as smooth as possible by keeping you informed of the timelines and requirements of you to meet all of the agreed upon terms and conditions of your accepted Offer.

When you buy or sell with an SMC Real Estate Agent, she or he will guide you through the entire closing process. You’ll also have access to your own private dashboard to view all of the transaction paperwork throughout the closing process at any time from your own computer anywhere.

SMC is proud of its reputation for staying on top and in constant communication with all of our clients from beginning to the end of the transaction and beyond. Please read our testimonials from clients on our website.

 Understanding Contingencies 

Contingencies are agreed upon conditions that are included with a mutually accepted Offer that must be fulfilled by the parties before the transaction can be closed—Money disbursed to seller and new Deed recorded for buyer(s). Common contingencies that come up during the closing process are home inspection, appraisal, condition of title, and financing contingencies.

It is called “Earnest Money” because it demonstrates to the Seller, that the Buyer is earnest in making their Offer to buy the Seller’s home.

Within one to three days after the seller accepts an Offer on a home, the buyer will deliver their Earnest Money to the escrow company named in the accepted Offer. The Escrow company is a neutral entity and is not a party to the purchase contract. They will hold the funds throughout the duration of the transaction.

Earnest money is typically 1%–3% of the sale price of the home and is applied toward the buyer’s down payment and closing costs. If the buyer backs out of the transaction for anything not covered by a contingency, the buyer is subject to the forfeiture of their earnest money.

The buyer must schedule a home inspection. A State-licensed inspector must be used for the home inspection. Your SMC agent will give you names of recommended home inspectors. The buyer must have the inspection completed and respond to the report provided to the buyer within the timelines agreed upon in the Purchase Agreement.

If the buyer does not reply within the agreed upon timeline, the buyer automatically accepts the condition of the home. Thus it is a crucial step that your agent will stay in communication with you on regarding meeting the timelines on this contingency.An inspection generally takes 3-4 hours for a typical 2,000 square foot home.

The buyer may attend the inspection per the terms of the purchase agreement. The home inspector will provide the buyer only, a report outlining the conditions found in the home as of the date of the inspection. The buyer will review the report and can discuss the report directly with the inspector, and may seek to have additional inspections by specific contractors such as a roofing or siding contractor in response to statements made in the home inspector’s report by use of a state-wide designated Form. Your SMC agent will complete the Form with you and submit it to the seller’s agent within the required time period.

If the buyer is seeking a loan for the purchase, the mortgage lender will require an appraisal. If the home does not appraise for the minimal value the lender needs in order to approve the loan the buyer is seeking, then the lender will not grant the loan to the buyer and the financing contingency will not be able to be satisfied and the transaction will not be able to move forward to closing.

In the event this occurs, your SMC agent will explain the negotiation options available to you in your financing documents. Prior to the appraisal, it is most helpful if Sellers have a list of all major improvements to the house throughout your ownership. If you added an addition to the home, the permits will be needed. The appraiser needs the accurate square footage of the home!

If you are getting a loan, the lender will periodically ask you to provide updated qualification documents—bank statements, other liquid asset funds, job verification W-2’s, and any other documents specific to your situation.

The lender will inform you when the appraisal has been approved by Underwriting which then allows the lender to provide you, the buyer, with your Closing Disclosure document that lays out all of your costs for the loan and the amount of money you will need to bring in to Escrow to close the purchase.  

The law requires that you have 3 business days to review the Closing Disclosure documents before you can sign your closing papers.

If the buyer has a title contingency, the Title company which is stated in the Purchase Agreement will “search” the condition of the Title to the property and verify who is in title to the property—who owns it, and verify any and all recorded liens and easements against the property. They will then provide all parties to the transaction with an initial full report of the condition of the Title as of the date the report is generated.

In the event the buyer has an objection to the original preliminary title report, the buyer is required to provide a written objection of that report to the seller’s agent within the stated time period of the purchase transaction. If no written objection is delivered to the seller through seller’s agent, then the buyer automatically accepts the condition of the preliminary Title Report. Thereafter, the Title company will repeat the search process and provide all parties with updated title reports throughout the transaction up to and including the day before closing.

What is title insurance? 

Title insurance provides the seller, the buyer, and the lender with a full report of the “condition of the title” as of the date of the title report. It shows all parties the owners, recorded lienholders and any and all other recorded easements or “clouds” on the title. 

The final Title Report gives all parties insurance against claims by parties against the ownership and transfer of the title to the buyer. It does not protect against unrecorded encumbrances.

Approximately one week to ten days before the scheduled signing and closing date, the buyer usually makes a “final walk-through” of the home. The purpose of which is to verify:

  •  That the house is in the relatively same condition as when the offer was accepted 
  •  That all agreed upon repairs have been completed correctly
  •  That all personal property that was included as part of the sale is still in the home

All contingencies satisfied, final walk-through completed, you’re ready to go to your scheduled closing appointment to sign all papers and get the Deed recorded in your name(s).  

Once Escrow receives the loan documents from the lender, if there is financing, they will contact you to schedule your signing appointment. The Escrow closing agent will look over the lender’s closing disclosure and make sure it matches escrow’s numbers. Once matched, escrow will email you your escrow closing statement with the remaining cash you must bring in to closing. The money must be in the form of a Cashier’s Check made payable to the Title Company. You must bring your driver’s license with you also.

Your SMC real estate agent will preview the lender’s closing disclosure and the escrow closing statement and will attend the closing signing with you. Even after the closing, your SMC agent will be available to you for any questions you may have. He/she will also stay in touch with you long after closing.