Closing day is one of the most exciting steps in buying a home. It’s when you finally get the keys to your new home! But before that moment, you’ll sit down at a mortgage office or a title company and sign a stack of documents. If you’re a first-time buyer, it can feel like you’re signing your life away.
Let’s walk through the most important documents you’ll encounter, why they matter, and where buyers often get confused.
Who Attends Closings
The Title Company: A title company makes sure the home you’re buying truly belongs to the seller and no one else has a legal claim to it. They also provide title insurance, which protects you and your lender in case there’s a surprise claim on the property later. Think of them as the referee ensuring the property is legally ready to be yours.
Your Mortgage Lender: Most lenders will attend closing to ensure a smooth process and to make sure all your final questions are answered. Whether you are signing at the title company, a realty office, or your lender’s office, someone neutral (like the title company) should be there to explain the documents and make sure everything is signed correctly.
Realtors: Your real estate agent and the seller’s agent may attend to support their clients, answer questions, and celebrate the closing.
The Seller: In some areas, the seller will also be there to sign documents transferring ownership. Generally, sellers will sign their paperwork ahead of time.
Not every closing will have all of these people in the room, but you can expect at least the title company representative and yourself, plus anyone else who needs to sign.
Key Documents You’ll Sign
Here’s what you can expect to see at the closing table:
- Closing Disclosure (CD)
- What it is: A detailed summary of your loan, showing your interest rate, monthly payment, and all fees and costs.
- Why it matters: This is your “receipt” for the loan. Compare it to your earlier Loan Estimate to make sure nothing changed unexpectedly. You want to make sure that the rate and monthly payment match what you expected when you applied.
- Promissory Note
- What it is: A legal promise that you’ll pay back the loan under certain terms, like interest rate and length.
- Think of it as: Your IOU to the bank.
- Mortgage or Deed of Trust
- What it is: A legal document that ties your loan to the property. If you don’t pay, the bank can take the house through foreclosure.
- Beginner tip: The note is the promise to pay; the mortgage is what secures that promise with your house.
- Deed
- What it is: The paper that transfers ownership from the seller to you.
- Why it matters: This is what makes you the legal homeowner. Always double-check your name and the property address.
Special Note: At closing, only a couple of documents are filed with the county and become part of the public record: the deed, which shows you as the new owner, and the mortgage or deed of trust, which shows the property is being used as collateral for your loan. Everything else you sign, like the promissory note or Closing Disclosure, stays private in your loan file with your lender and title company. This means someone could look up property records and see who owns the home and if there’s a loan on it, but not your personal financial details.
- Title Insurance Documents
When you buy a home, one of the costs you’ll see on your closing paperwork is title insurance. This protects against problems with the home’s ownership history, like an old unpaid lien, a missing signature on a deed, or someone later claiming they still have rights to the property.
- Owner’s Policy: Protects you if someone claims they still own the house later.
- Lender’s Policy: Protects the bank.
- Beginner tip: This is a one-time fee, not a monthly bill.
- Affidavits and Declarations
- What they are: Statements you sign saying things like “this is my legal identity” or “this house will be my primary residence.”
- Beginner tip: These feel repetitive, but they are standard.
- Escrow and Tax Documents
- Escrow: A special account where your lender collects money each month for property taxes and homeowners’ insurance, then pays those bills for you.
- Beginner tip: If your loan doesn’t have escrow, you’ll need to set money aside on your own to cover those bills. This is something you need to pay attention to and ask your lender about. We break down exactly what your mortgage payment includes in more depth here.
Paying at Closing
When you arrive at the closing table, you’ll be responsible for bringing the funds that finalize your purchase. This includes both your closing costs and your down payment.
Closing Costs cover a range of fees, such as appraisal charges, credit report fees, lender underwriting or origination fees, recording fees for filing your deed, and prepaid amounts for taxes or homeowners’ insurance. Title insurance will also appear here, protecting both you and your lender against ownership disputes. These costs are usually paid in a single lump sum, most often through a wire transfer or cashier’s check.
Down Payment Funds are the portion of the home’s price that you pay upfront. This money is applied directly toward the purchase price and shows your lender you are contributing to the investment. Your Closing Disclosure will tell you exactly how much to bring and how it must be paid. Be prepared ahead of time, as personal checks or standard online transfers are rarely accepted.
Red Flags to Watch For include any surprises on your Closing Disclosure that don’t match what your lender promised. Pay special attention to your interest rate, any unexpected fees, or terms like prepayment penalties that weren’t discussed earlier. If something seems off, ask for clarification before signing. It’s far easier to fix an error in the paperwork now than after the loan is finalized.
Purchase vs. Refinance: How the Closing Differs
If you’re buying a home, your closing includes transferring ownership from the seller to you. That’s why there’s a deed and title insurance protecting you as the new owner.
If you’re refinancing, the process is very different:
- No Deed Transfer: You already own the home, so there’s no seller and no new deed.
- Title Company Still Involved: They’ll check that your title is clear and issue updated title insurance for the lender.
- Fewer People at the Table: A refinance closing usually just involves you, the title agent, and sometimes a notary.
- Right to Cancel: In most refinance loans, you have a three-day cooling-off period after signing. That means you can cancel without penalty within three business days if you change your mind. Purchases don’t have this option.
In short, purchase closings are about transferring ownership and finalizing a loan. Refinance closings are just about replacing your old loan with a new one.
Tips for First-Time Buyers
- Don’t rush. You can ask for explanations before you sign.
- Check spelling. Make sure your name and address are correct.
- Bring ID. Most title companies require at least two forms of identification.
- Ask questions. If you don’t understand something, the title agent or lender should explain it in plain terms. Don’t be afraid to voice any concerns and ask for things to be explained.
Closing day comes with a mountain of paperwork, but each document has a purpose, protecting you, the lender, or the seller. By understanding what you’re signing and how purchase and refinance closings differ, you’ll enter the room with confidence and leave as a proud homeowner.