This is it: your dream home! You found the place, made your bid, haggled out the specifics, struck a deal, and got through the financing paperwork mountain. Now it is time to close. What does that mean? Let us break down the closing process and put your mind at ease, to let you sail through these final few steps to home ownership.
The home closing is the final step in the long process to home ownership. Closing is completed when the deed and title is transferred from the seller to the buyer. Copies of financing documentation and proof of insurance are then transmitted to the county recorder as well.
Typical buyer costs: As can be expected, the closing process does involve some significant fees. Lenders are required to give an estimate of closing costs within three days of your applications, according to the Real Estate Settlement Procedures Act. In some cases, the lender’s fees are negotiable, and sometimes the seller will pay some of the closing costs. The fee scales for lenders and realtors also vary, so there is never one set price. Attorneys and third-party escrow holders are professionals that charge for their services as well. The general rule of thumb advises to anticipate 2-5% of the home purchase price for closing cost fees. With this model as a guide, for example, using 2019’s median home price of $315,000, the low end of average closing costs would likely be about $6,300 (2%). Fees vary depending on the price of the home and the lender fees applied. Comparing different lenders can help to minimize fees in the closing process.
What is included in closing costs?
- Origination fee or broker fee (0-1% of loan amount) — Typically includes all the small fees charged by your lender or broker to set up the loan
- Mortgage points or “discount fee” (0-1% of loan amount) — Optional upfront fees paid to lower your mortgage rate
- Title insurance ($300-$2,500+) — Fees paid to check historical records and make sure the property can be legally transferred to you
- Escrow fees ($350-$1,000+) — Fees paid to a third-party “escrow company” that handles funds and facilitates the home sale
- Home appraisal ($500-$1,000+) — Fee to evaluate the home’s fair sale price or refinance value
- Prepaid taxes and insurance ($1,000-$4,500+) — Generally you pay six months to a year of property taxes and homeowners insurance in advance when you close
Agent representation during closing Agents are required by law to represent you as the buyer, and to place your interests above their own. This principle is known as “fiduciary duty.” An agent can help navigate the complex closing process and help handle anything that may be confusing with the escrow officer. Being a professional who consistently deals with homes closing, your real estate agent has the experience needed to navigate the process and advocate for you. Your agent will be able to be present with you during your final walk through, note any unresolved issues, spot and correct any errors in closing paperwork, and assure that all terms and conditions of the contract have been satisfied before the deal finalizes and the deed transfers ownership.
What do I need to bring with me?
- Photo Identification for all signers
- (Cashier’s check, checkbook, or information for wire transfer transaction)
- Proof of Homeowner’s Insurance
- Any documentation from any point in the purchase process, from contract to close (for you to reference)
When do I get my keys? It is a common misconception that at the end of this long and complicated process, you will be handed your keys. The reality is that in Arizona, home buyers rarely see keys to their new purchase at the closing. It takes between 24-48 hours for lender monies to fund the loan, assuming no problems arise. Once this is done, the new deed must be recorded with the county. After that official confirmation is in hand, your agent will at last arrive to present you with your keys.
