Do You Get Keys at Closing? A Homebuyer’s Guide to Closing Day

Buyers already know that closing day is a big deal, but few know what takes place before they get their keys. You’d be surprised by how many people are under the assumption that once they sign the mountain of paperwork, the deal is done, and they can start moving in.

Wrong! Quite a few things have to happen before you can call the house yours.

1. Financing

On closing day, you are expected to bring the rest of the money you owe to the table, or you won’t walk away with the keys. The money needs to cover the down payment and closing costs, which can be in the form of a cashier’s check or wire transfer.

Your down payment is the amount (usually calculated as a percentage of the home’s total purchase price) that you pay upfront on the house; your mortgage loan doesn’t cover it. The size of your down payment will depend on your financials and what kind of mortgage loan you have.

It’s important to note that the money you paid after the seller accepted your offer is not the entire down payment — it is called an earnest money deposit. It is made to show the seller that you are serious about following through and closing on the sale. You will lose your earnest money if you back out of the deal.

The earnest money deposit can be as low as $500. However, in most cases, it’s standard to offer 1% to 3% of the final purchase price as earnest money. If you’re interested in buying a high-priced home or if you’re buying in a competitive market, you might want to offer an earnest money number as high as 10% of the purchase price.

Along with the down payment, you are going to have to cover the closing costs; of course, sellers also have some closing costs, too.  A few of the items included in closing costs are:

• Home appraisal
• Escrow fees
• Flood certification
• Property taxes
• Title and attorney fees
• Lender fees

2. Purchase contract

The purchase contract, also known as a real estate contract, is a stack of papers that outlines basic information about the deal, such as who’s buying and selling the house, the description and location of the property, the proposed closing date, and the purchase price. It will also detail the transaction’s finer points, such as the condition of the home and what fixtures or appliances are included in the sale.

While the buyer must understand the purchase contract in full, it’s strongly advised to pay special attention to any addendums or contingencies added in. These addendums and contingencies can modify the contract in a few ways.

Contingencies can also be a factor. A common one is a financing contingency, which states what kind of loan the buyer is trying to get. If the buyer can’t get the loan they applied for, this contingency will let the buyer back out of the contract, penalty-free.

Another contingency could let the buyer back out of the contract if the home inspection uncovers major problems with the home. If the buyer wants the home, they can ask the seller to lower the price or credit instead of repairs.

The appraisal contingency is required for most mortgage loans to ensure the house is worth at least the money you are borrowing to buy it. If the appraiser thinks the house is worth less than the purchase price, you can renegotiate with the seller or back out of the contract without losing your earnest money.

There are also some instances where the buyer will add a contingency that they will only go through with this transaction if they can sell their current home.

3. Other documents

On the day of closing, be prepared to sign many documents! Some of these documents must be notarized and recorded with the city or county recorder. Fortunately, the closing attorney or the title agent will send the documents (either online or in person) to the city or county recorder, and then the house is officially yours.

Let’s take a look at the documents that you’ll be signing.

Deed

The deed is a physical document that transfers the property title from the seller to the buyer.  When the new deed is made in the buyer’s name, it is recorded with the city. Remember that since it is recorded with the city, it will be made public that you officially and legally own the property.

There are a few different types of property deeds, but the three most common are called a general warranty deed, a grant deed, and a quitclaim deed. The general warranty and grant deed have some provisions that’ll protect you as the buyer. Upon signing the deed, the seller is indicating that the house is clear of title defects, liens, and other problems with the title.

Title review

Much like a background check for employment, a title review is done for the buyer’s benefit, and mortgage lenders often will require a title review, too. The title company or real estate attorney investigates the title to ensure that there aren’t any liens on the house, missing heirs, or other issues. If the search turns up any problems or defects, that could delay closing.

Mortgage or deed of trust

A mortgage, sometimes called a deed of trust, is an agreement between the buyer and mortgage lender that says the lender has an interest in the property. Should the buyer default on the loan, this document states that the lender has the right to put the property up for foreclosure.

Closing day is going to be hectic, and you’re going to be a bundle of nerves. That is completely understandable because this is a monumental moment in your life! Of course, you want to make sure everything goes smoothly and everything is as it should be for the transaction to be completed.

When you’re reviewing the contract, make sure you take note of when the deed and mortgage will be recorded. If the closing is finalized before 3 p.m. and it’s not a Friday, you’ll likely get the keys that day. (That is if there isn’t a contingency in place that allows the seller some extra time to vacate the home.)

Not only do you want to make sure you pay attention to the contract and have the necessary funds with you, but you are also going to want to be mindful of the final walkthrough.

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