Real talk: buying a house can be intimidating. So we created the first-time homebuyer series to take the mystery and anxiety out of the house-hunting process. Dive into our complete guide which covers every step of the process: why you should buy a house, how to get pre-approved for a loan, how to find an agent, how to search for a home, how to make an offer (and negotiate!), how an inspection works and how to close once you find the dream home. Don’t worry we spell it all out for you so that if this is your first time (or third) you’ll have all of the information you need for a successful purchase right at your fingertips. Read the entire series here.
Ready the champagne and throw some confetti, it’s officially closing day! This is what you’ve been working towards since you first started saving up for that downpayment. Closing day is a time for celebration. Your lender has agreed to fund your home loan, the sellers have finished all updates, your closing agent is ready to finalize paperwork- it’s all coming together!
There is a little more to closing than just showing up, signing some papers and walking out with the keys to your new home. We’ll explain how to close on your home by going through:
- What a closing agent is
- Closing costs
- What closing day looks like
- What to bring to the closing
- The questions buyers should ask at closing
If you’d like to jump to a certain section of the guide, just click the links above.
Let’s dive in!
Meet the Experts
What is a Closing Agent?
You may be wondering why you need a closing agent for the last step in the home buying process- isn’t your real estate agent enough? There are a lot of third parties that will join you and your agent for this step simply because there is a lot more to closing than just signing a paper and walking away with keys.
“A real estate closing agent, also known as an escrow agent or a settlement agent, is a third-party representative who handles the disbursement of funds and transferring of documents on the day of closing,” explained Jes Kettleson. “Although you may only see them for one day, they handle many things prior to closing and after closing to make sure your transaction is handled smoothly and correctly.”
When does a closing agent get involved?
“A closing agent is typically secured and picked when the home goes pending,” said Kettleson. (Pending is when an offer has been accepted on a house but the deal hasn’t closed yet.)
“You can also start a conversation with your closing agent prior to even choosing a property to talk about the process, documents and their fees and costs,” she went on. “If you are purchasing a home that’s for sale by owner, refinancing, buying a home on contract or have any questions on other types of transactions, your closing agent can act as a wealth of knowledge on most things real estate. They typically work with a lot of different vendors, so they can usually refer you to the correct places as needed.”
How do I choose a closing agent?
You may not always work with a closing agent from a different company. Your lender will let you know if you’ll close on your home with the lender and their team or if you need to find a closing company.
If you do need to find a closing company, your agent can help! Just like they were able to help you find a lender, inspector, pest inspector and other third-party vendors, they can give you a list of closing companies they’ve worked with and you can pick your closer.
“Choosing a closing agent is like choosing any type of vendor in real estate – you should call a few and pick the one that has the most knowledge, who you are most comfortable with and who has a connection with your lender and/or your real estate agent,” explained Kettleson. “You will be talking to your closing agent a few times during the transaction, but most of the time they work behind the scenes making sure everything is in place, so make sure it is someone you can trust to work accurately for you and get you to closing on time!”
If you do work with an outside closing agent, your loan officer will still be involved. Your closer, lender and real estate agent should be communicating every step of the way.
What are Closing Costs?
Some first-time buyers may head into a transaction not really knowing what closing costs are, how much they’ll be or how you’ll pay them. Closing costs cover everything needed to prepare you to close which includes:
- County recording fees
- Credit report fee
- Lender origination fee
- Underwriting fee
- Survey fees (if applicable)
- Title search
- Title insurance
- The first year of homeowners insurance
- Attorney fees
- Any escrowed items
Closing costs are bundled together and you pay them in one lump sum at the end of your transaction. The payment is disbursed to everyone involved in the closing process: your lender, your closing agent (if you use one) and the attorneys handling the paperwork.
How are closing costs calculated?
Closing costs can vary based on how you’re buying the house, whether it be cash or financing. If you’re buying a home with cash, your closing costs will be a lot lower since you won’t be using and paying a lender. If you’re financing the purchase, your closing costs can vary based on what kind of home loan you’re using.
“A lot of fees are based on purchase price as well,” added Kettleson. “There are also some fees that you can purchase in addition to normal fees (e.g. owner title policies) that might not be mandatory, but may be a good idea.”
When do I get an estimate of closing costs?
The good news is, you can get an estimate of closing costs from your lender at the beginning of the home buying process. “Closing costs can be estimated pretty early in the process before you even write an offer,” stated Kettleson. “If you have a property in mind, your closing agent, REALTOR® or lender can usually get you an estimate of closing costs so that you can plan accordingly.”
It would be smart to get an estimate of closings costs as early as possible so you can account for the expense.
How much are closing costs?
“Closing costs for a typical loan should be in the range of $1800-$2500,” said Brian Swanson. “This takes care of all third parties through the transaction and generally the lender underwriting and processing fees also, which are the same no matter the loan size. On top of this amount are items called points – you can have origination points (which is a lender fee) or discount points (which allow for buying down the interest rate). All points are not generally required, except for some specialized loan programs.”
Almost all lenders will be pretty competitive when it comes to closing costs so you most likely won’t see big difference in fees among lenders.
Who pays closing costs?
Typically, the buyer pays for the closing costs. You should be prepared to have the funds saved to cover them. You’ll pay them at closing using the same payment method as your down payment.
Sometimes, you can negotiate for the seller to cover some of or all of the closing costs but this depends on your situation. Sometimes a seller is eager to complete the transaction and will throw it in to sweeten the deal during negotiations with your agent. If this is the case, your agent will make sure it’s part of your final purchase agreement.
You may also have to account for property taxes. “Since Iowa pays taxes in arrears, you should receive a credit from the seller for taxes during the time they owned the property,” said Kettleson.
What Happens on Closing Day?
Closing day is the finish line! This is the day you and your agent have been working toward for a long time and you may feel relieved, excited and anxious about all the money you’re about to spend. That’s normal!
“Usually you, your real estate agent and lender, if applicable, come to the closing agent or lender’s office at the time picked out that is most convenient for you,” explained Kettleson. “Closing typically takes about 15-60 minutes depending on how many questions you have and how many documents there are to sign. Your closing agent walks you through each of the documents, answers all of your questions and makes copies for you to take. At the end of closing, you should leave knowledgeable, comfortable and excited because you just bought a new property!”
Your lender can join you at closing to help explain all of the financial documents you’re about to sign. “If questions arise that either need to be reiterated or maybe were never asked before, it’s the lender’s opportunity to provide answers,” explained Swanson. “I will generally do a final review with the client on the closing disclosure that covers all of the important terms of the transaction in costs, rate, payment and cash to close. Then we can start the signatures!”
You’ll have quite the group of experts available at closing to help clarify the documents you’ll sign and answer any new questions you may think of. The sellers are not present at closing, they will already have completed the necessary paperwork.
What should I bring to the closing?
Your closing agent, the loan officer and the attorney handling the paperwork will all bring the essential documents you’ll need to sign. However, as the buyer, you’ll need to bring quite a few important documents yourself. You need to bring:
- Funds for the downpayment
- Funds for closing costs
- Photo I.D.
- Any lender-required paperwork
Funds for the downpayment- “Please check with your closing agent how your funds are supposed to arrive,” said Kettleson. “Some closing agents only accept wire transfer, while others will only accept certified funds or a cashier’s check. Always check with your closing agent prior to sending any funds to determine who it’s going to and the exact amount, just in case anything has changed.”
Funds for the closing costs- If you are covering all of the closing costs, you will need to be prepared to pay it at closing, using your closing agent’s preferred method. If the seller is covering part of the costs, be prepared with your portion. If the seller is covering all of it, it will already be handled.
Photo I.D.- “All closing companies will require at least one form of photo identification,” explained Kettleson. “Some may require a second as well, like a Social Security card, insurance card, etc. Please check with your closing agent to see what they would require.”
Lender-required paperwork- Some lenders may require additional documentation from you or original files that they haven’t gotten from you before. They may also require additional documentation for special situations, such as a power of attorney.
What Questions Should I Ask at Closing?
Closing day is one of the best times to ask questions- you have all of your home buying experts in one room! This is also your last chance to ask questions before you officially purchase your new home. If you have any questions, confusion or just need clarity on something you may have already talked to your lender about, don’t be afraid to ask!
“This may be the last time you will be face-to-face with some of these agents, so feel free to bring any and all of your questions,” said Kettleson. “Don’t worry, these people don’t go away after the transaction, but this is the perfect time to pick their brains!”
Our experts weigh in on questions to ask at closing
“Buyers should have full disclosure of the program they’re getting themselves into,” said Swanson. “This is a very large financial commitment and not something you can walk away from unscathed. They need to understand how their loan works. If it’s an adjustable-rate, ask when it adjusts and how. If it is a balloon note, ask when it matures and how much will you will owe at that time, and so on.”
Ideally, you would already have had this conversation with your lender. But if you haven’t or still have questions, do not sign your loan paperwork without understanding it! “I see all too often people who have no idea, even a few years later, what they really have and how their mortgage works,” said Swanson.
Kettleson agrees with asking questions about your mortgage. “Ask when your first mortgage payment is due and how do you pay it,” she said. “You should ask about Homestead Credit and if there are any other credits you can sign up for. Buyers should also ask where they can find copies of all the documents you review during closing and who to go to with questions later on. You should also ask when you’ll receive your abstract and owner’s policy, if applicable.”
Kettleson also had some lighthearted advice for buyers: “Closing doesn’t have to be boring! Closers love to have fun and educate their buyers, so ask as many questions as you would like,” she said. “No question is ever out of the ordinary, so ask away! Most of us have bought at least one (or many) houses before, so we have been in your shoes before. Let’s make this a fun time to celebrate you because this is a huge step!”
Who can I go to with questions in the future?
You may be wondering who to reach out to if you have questions or if something comes up further down the road. Months or even a year or more after closing, who can you turn to for information?
Your loan officer is your best resource for questions about your home loan or if anything changes with your financial situation in the future.
“I gain a relationship with a majority of my clients and I want them to stay in touch,” said Swanson. “There are always questions that come up and it is easier to ask the person that helped you set up the transaction rather than explaining your situation again. This could be for future savings opportunities with a refinance, a general question on payment or escrow or a strange-looking mailing that someone sent you trying to get you to buy something.”
Closing should be the most exciting part of the home buying process. Once you’ve had all of your questions answered and signed all the necessary paperwork, your agent will present you with the keys to your new home. If your possession date is the same day as closing, you will then be officially free to head to your new home!
Don’t forget that your relationship with your real estate agent doesn’t have to end once you’ve settled into your new home. They can still be a great resource for you down the road. You can ask them for suggestions if you’re ever looking for a good contractor, plumber or other home improvement vendors. They can help you with the right contact information if you ever had questions about your home warranty. Don’t be afraid to connect with your agent on social media, email or however you prefer to communicate!
The journey to homeownership can be a long one. You worked hard to save for a downpayment and get pre-approval from your lender. You had to find a good agent who understood your needs and advocated for you every step of the way. The home buying process is not an easy one. It’s an emotional roller coaster full of ups and downs with pitfalls along the way- sometimes it might feel like you’ll never get to closing. Now you have the keys to your new home and you can officially call yourself a first-time homebuyer!