The closing process, or settlement, transfers ownership of your new home from the seller to you. Yes, there’s a lot going on, and a lot of money is going to change hands. But when you know what to expect and plan well, it can be a smooth, relatively low-stress experience.
The home closing process really starts as soon as you and the seller have signed a sales agreement. People often refer to this period as being “in escrow.”
What’s the timeline? Usually four to six weeks. In tight markets, however, it can be as long as two months, because it’s harder for sellers to coordinate the sale of their house with buying another.
Closing on a home is a big deal, yet it might actually be easier than finding one that you want and can afford in the first place. And when it’s over, you leave with the keys! And a mortgage.
1. Choose a real estate lawyer
To close the deal on your home, you need a closing agent (also called a settlement or escrow agent). They’ll coordinate document signing for all the parties, verify that both you and the seller have met the terms of the purchase agreement, and finally pay out all funds, transfer the title, and record the deed.
In most counties, the closing agent is a neutral third party who works for a settlement company (often called an escrow company). Sometimes you can choose the company; this is often negotiated with the seller. The standardized Loan Estimate form you received after you applied for your loan lists the closing services you can shop for.
A handful of sellers require that you hire your own real estate lawyer to serve as your closing agent. Yet others require one to prepare only certain documents, so you end up with both a settlement company and a real estate lawyer.
Where a lawyer is optional, you might want one anyway. Unless you hire your own lawyer, there’s no one at the closing who exclusively represents your legal interests. If there’s anything unusual about the sale, definitely play it safe and hire one. Even the best real estate agent is not a real estate lawyer.
2. Buy homeowners insurance
Although most Kenyans hardly get homeowners insurance. Some lenders require you to buy homeowners insurance and bring the policy to the closing. That coverage is pretty important to both you and them!
As you can imagine, the cost of insurance varies widely depending on the value of your home, how valuable your stuff is, and where you live.
3. Meet the conditions of the loan
Before you can close, you have to meet all the conditions set by your lender. They’re stated in your loan documents.
Some conditions could be specific to your loan, but standard ones include a clear title deed, an appraisal figure that’s at least the amount of the loan, documentation of your income, and proof of insurance. If you become concerned about meeting any of the conditions, contact your lender.
4. Prepare to move in
Once you know your closing date, you can swing into action on your move. Do yourself a favour and start your organizing, packing, and other tasks early. You’ll have enough on your mind on the closing day without worrying about finding more boxes.
5. Review the Closing Disclosure
This critical document, a nationally standardized form, itemizes the closing costs to both you and the seller and outlines key information about your loan. Because it’s so important, the law requires that your lender get it to you at least three business days before closing so you have plenty of time to review it.
The costs shown in the Closing Disclosure should be similar to what you saw on the Loan Estimate back when you applied for the loan. Any surprises? Start asking questions.
6. Do the final walk-through of the home
The walk-through is a quick final look at your soon-to-be home. Your agent will schedule it, ideally for the same day you close. It’s best to do it within 24 hours before closing.
The walk-through may be quick, but it isn’t just a formality. Before you take ownership of the property, you need to make sure the seller really has moved out and left things in the condition you agreed to.
Every agent has stories: sellers who haven’t even started packing, a smashed picture window. Moreover, if anything is amiss, your agent will get on the phone immediately. And if your concerns can’t be resolved before the scheduled closing, it can be delayed.
If the seller was supposed to do anything major, have the work inspected by a professional before the walk-through.
7. Gather your documents
The closing agent (whether that’s a settlement company or your attorney) will send you a list of everything you need to bring to the closing. If you have any questions, don’t hesitate to contact the closing agent or your lender.
Here’s the minimum you usually need to bring:
- Your homeowner’s insurance policy
- Photo identification
- A list of your addresses for the past 10 years
- A cashier’s check for “cash to close” (closing costs and down payment), if you haven’t paid ahead of time
- Your chequebook, just in case
8. Go to the closing and get the keys!
The last step of the closing process is the actual legal transfer of the home from the seller to you. The mortgage and other documents are signed, payments are exchanged, and finally, the waiting is over: you get the keys. If you have any unanswered questions, this is your last chance.
You’ll be facing a pretty big pile of paperwork. It’s not so bad if you know what’s coming, so here’s a brief guide to your closing documents.
Closing is usually held at the seller’s home. If your closing agent is your own lawyer, it will probably be at their office.
Who will be there? This varies depending on where you live. Your real estate agent can tell you what to expect. Sometimes there’s a real crowd, including the escrow agent, your lawyer if you have one, the seller’s lawyer if they have one, the lender’s representative, the seller, and both real estate agents.