Real estate closing process in 6 steps
So you've submitted an order for settlement – what happens next? This is a common question we receive from homebuyers wanting to know the next step in the real estate closing process.
In this article I will outline the steps that occur in between placing an order for settlement services and signing the documents at the closing table. Terms and procedures may vary slightly by jurisdiction, and this is a generic outline of the real estate closing procedure.
Here at Federal Title we have a dedicated team of closing experts that includes settlement coordinators, processors and attorneys, who will guide you through the final steps of your journey to home ownership.
STEP 1: After we receive the order request for settlement services, a title search is ordered. (You can place the order online or have your real estate agent help you.) A title search is a review of the chain of title to your property done by a title examiner at the local courthouse.
The title examiner is looking for title clouds that could delay your closing. A cloud could be any number of things ranging from liens on the property to an outstanding loan or home equity line of credit, to outstanding real estate taxes or utilities. Judgments, unreleased deeds of trust and ownership claims can also create title clouds.
STEP 2: The title search is handed off to a processor, who works with your mortgage company to obtain instructions about the terms of your loan. The processor works as a liaison, coordinating with you and your real estate agent, your mortgage lender and other parties involved in the real estate transaction. She will confirm the date and time or your closing and help you through the rest of the settlement process leading up to your closing date.
STEP 3: Next, the title insurance underwriter (in our case it's First American Title Insurance Company) will review the completed title search and contract. The underwriter is looking for potential risk in the transaction, a.k.a. title clouds. Any clouds must be addressed and corrected before settlement can take place. If all goes well and the title is clean, the title insurance underwriter will provide to your lender a commitment to insure, or title binder, which advises the lender of the status of the title to the property.
STEP 4: The processor will then collect the rest of the documents needed for your closing. These documents include the deed, termite report, seller mortgage payoffs, repair bills, a preliminary HUD-1 settlement statement and homeowner's insurance policy. Your lender will receive copies of these documents to review and approve. This process typically occurs just a few business days prior to your scheduled closing.
STEP 5: Once your lender reviews and approves all the closing documents, he will send your loan documents to our office for signing. This typically occurs the day prior to your scheduled closing, but sometimes may not be completed until the day of settlement. The processor will call or email you to confirm the time of your scheduled closing and tell you how much money you will need to close the real estate transaction. In most cases, homebuyers bring this money in the form of a cashier's check, though wire transfers are also acceptable.
STEP 6: The big day! Buyers and sellers will come into our office for their closing appointment. For sellers there is a lot less paperwork to read and sign, so they can expect to be finished within 20 minutes. Buyers bear the brunt of the paperwork and should plan for an hour to read and sign everything.
* Tip * Save time by reviewing closing documents prior to your settlement date on our website. That way you'll feel less rushed to get through everything and more prepared. You'll also know in advance if you have questions for your settlement attorney and ideally avoid settlement surprises.
Once the documents are signed and closing funds are received, the homebuyer will receive a copy of the deed to the property and the keys. Congratulations! The property is yours.
Bonus STEP: The following day, the deed and deed of trust are delivered to the courthouse so they may be recorded. The original deed will be returned to you after recording but, depending on the jurisdiction, this could take several months. Signed documents are returned to your lender.
That's it! Hopefully the real estate closing process will seem less intimidating now. For more on how the real estate closing process works, check out this video that explains it step-by-step in a way that's easy follow and understand.