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How Does Closing Work?
There Are Many Steps to the Closing Process.

There Are Many Steps to the Closing Process.

Closing" (also known as "settlement") on a home sale
means legally transferring ownership from one party
to another. This process can take 30 to 60 days, and culminates in the signing of contracts and passing over the keys from the seller to the buyer.

Top Five Questions About Closing How Does Closing Work?

1. What are closing costs, and how much are they? Closing costs are charges that are paid when property changes hands. These costs cover services required to process the transaction, including title work, appraisals, inspections, document preparation, recording fees and other expenses. In many cases, there are also loan origination fees (charged by the loan officer to find the right loan and secure approval) that are part of the closing costs.


At closing, you typically pay 1% to 2% of the purchase price for "closing costs" and another 1% to 2% for "pre-paid items." Closing costs usually fall into 4 primary areas:

  • Mortgage Costs: Loan Origination Fee, Points, Document Prep, Commitment Fee, Underwriting Fees
  • Outside Vender Costs: Appraisal, Credit Report, Flood Determination Fee
  • Title Costs: Settlement Fee, Title/Abstract Search, Title Insurance Premium (Lenders Policy - required and paid for by Buyer), Owners Title Insurance Policy (optional and paid for by Buyer), Plat Drawing
  • Government Fees: Title Recording Fees, Mortgage Registration Tax

The pre-paid items involve upfront payment of typical "year one" costs of home ownership. The most common items are homeowner's insurance premiums and real estate taxes.

2. Do I really need title insurance? Buying a home is one of the biggest decisions and financial investments you'll make in your lifetime. Title insurance protects your claim to your property from potential problems caused by mistakes and irregularities that may have occurred in the past.  Dollar for dollar, it's one of the most cost-efficient forms of insurance for home owners. Its relatively low, one-time premium covers you against legal problems that could cost tens of thousands of dollars-and even the loss of your home. 

3. How long does closing take? Going through all the steps involved in the legal transfer of property varies from one sale to another, but traditionally most sales close in about a month.  In recent years, 15 day closing periods have become more common, and in some cases buyers and sellers agree to wait 60 or 90 days before closing. Signing the papers and handing over checks and keys will take about an hour.

4. Can I move into my new home on the day of closing? Your move-in date is usually part of the purchase agreement and is often determined by local practices. Realistically, it's challenging to close and move in the same day, and it can be risky to plan it that way.  If the closing takes longer than expected or gets delayed by even a day, you'll find yourself pressed to manage the move and perhaps stranded between properties.   And even if you could move that day, why would you want to? Why not take the rest of the day to celebrate your momentous purchase-then get plenty of rest and handle the big move tomorrow.

5. What do I need to bring to closing? Buyers and sellers both need a form of photo ID, such as a valid driver's license or passport. Any money you owe should be in the form of a cashier's check.