The real estate closing process is the final stage of buying or selling a property. During closing, the buyer and seller sign the required documents, the buyer pays the remaining funds, the lender funds the mortgage if applicable, and ownership transfers from the seller to the buyer.

Closing is also called settlement or close of escrow. In a financed purchase, the mortgage closing and property purchase closing usually happen at the same time. The process includes a five-page Closing Disclosure for most mortgage purchases, which the buyer generally receives at least three business days before closing.

Real Estate Closing Process at a Glance

Stage What happens
Purchase contract The buyer and seller agree on the price, closing date and contract terms.
Due diligence The buyer completes inspections, appraisal, title review and insurance arrangements.
Loan approval The lender verifies the buyer's finances and prepares the mortgage documents.
Closing preparation The closing agent prepares the settlement documents and calculates the money due.
Closing Disclosure The buyer reviews the final mortgage terms and closing costs.
Final walkthrough The buyer confirms that the property is in the agreed condition.
Signing and funding The parties sign documents, the buyer provides funds and the lender funds the loan.
Recording and possession The deed is recorded according to local procedures, and the buyer receives the keys.

What Happens Before Closing?

The closing process normally begins after the buyer and seller sign a purchase agreement. The contract sets the purchase price, contingencies, closing date and responsibility for certain costs.

Before closing, the buyer usually completes these steps:

  1. Home inspection: The buyer checks the property's condition and may negotiate repairs or credits.
  2. Appraisal: The mortgage lender orders an appraisal to evaluate the property's market value.
  3. Title search: The title company or attorney searches public records for ownership problems, liens, unpaid taxes and other claims.
  4. Title insurance: The lender may require lender's title insurance. The buyer may also purchase an owner's title insurance policy.
  5. Homeowners insurance: The buyer provides proof of insurance before the mortgage can close.
  6. Final loan underwriting: The lender reviews the buyer's income, assets, debts, credit information and source of funds.
  7. Closing preparation: The closing agent gathers the deed, mortgage documents, payoff statements, tax information and other required paperwork.

The closing agent may be a title company, escrow company or attorney. The role depends on state law and local practice. Some states commonly require attorneys to conduct or supervise closings, while others commonly use title or escrow companies.

What Is the Closing Disclosure?

The Closing Disclosure is the final five-page form for most mortgage purchases. It lists the loan amount, interest rate, projected monthly payment, closing costs and the amount the buyer must bring to closing.

Federal rules generally require the lender to provide the Closing Disclosure at least three business days before the scheduled mortgage closing. The buyer should compare it with the earlier Loan Estimate and ask the lender about unexpected changes.

The buyer should check:

  • Name and property address
  • Purchase price
  • Loan amount
  • Interest rate and loan term
  • Monthly principal and interest payment
  • Property taxes and homeowners insurance
  • Lender fees and discount points
  • Title and settlement charges
  • Seller credits and lender credits
  • Prepaid interest
  • Initial escrow payment
  • Cash to close

Certain major changes can require a corrected Closing Disclosure and another three-business-day waiting period. Examples include an inaccurate annual percentage rate, a changed loan product or the addition of a prepayment penalty.

What Are Closing Costs?

Closing costs are the expenses required to complete the property sale and mortgage transaction. They are separate from the purchase price, although the buyer's total cash requirement can include both the down payment and closing costs.

Common buyer closing costs include:

  • Loan origination charges
  • Appraisal fee
  • Credit report fee
  • Title search and title insurance
  • Settlement or escrow fee
  • Recording fees
  • Transfer taxes, where applicable
  • Prepaid property taxes
  • Prepaid homeowners insurance
  • Initial escrow deposit
  • Mortgage insurance, if required
  • Attorney fees, where applicable

The purchase contract and local custom determine which costs the buyer and seller pay. The Closing Disclosure provides the final itemized figures for a financed purchase.

The buyer's cash to close usually reflects the down payment, closing costs, earnest money already paid, seller credits, lender credits and other adjustments. The closing agent or lender provides instructions for delivering the funds, commonly by wire transfer or cashier's check.

What Happens on Closing Day?

At the closing appointment, the buyer, seller and other participants complete the transaction.

The Buyer Typically:

  • Shows government-issued identification
  • Reviews and signs the mortgage documents
  • Signs the promissory note
  • Signs the mortgage or deed of trust
  • Signs the Closing Disclosure or settlement statement
  • Provides the down payment and closing funds
  • Signs documents related to title and escrow
  • Receives information about payments, insurance and property taxes

The Seller Typically:

  • Signs the deed transferring the property
  • Signs the settlement statement
  • Provides payoff information for the existing mortgage
  • Signs required affidavits and disclosures
  • Delivers keys, access devices and agreed property items
  • Receives the sale proceeds after required deductions

The buyer's main loan documents generally include the promissory note, which creates the repayment obligation; the mortgage or deed of trust, which secures the loan against the property; and the deed, which transfers ownership.

After all conditions are satisfied, the closing agent distributes the money. The seller's existing mortgage, taxes, commissions and other approved charges are paid, and the seller receives the remaining proceeds.

When Does the Buyer Receive the Keys?

The buyer receives the keys when the transaction is complete under the contract and local closing procedures. In many transactions, the closing agent submits the deed for recording before the buyer receives possession. Some contracts allow possession immediately after signing, while others specify a later date or time.

The contract should state:

  • The closing date
  • The possession date
  • Whether the seller may remain temporarily
  • When keys and access codes will be delivered
  • What happens if recording or funding is delayed

Recording and possession rules vary by jurisdiction. The buyer should ask the closing agent exactly when ownership and possession become effective.

What Is the Final Walkthrough?

The final walkthrough is the buyer's last inspection of the property before closing. It is not usually a new home inspection. The buyer uses it to confirm that:

  • The property is substantially in the agreed condition
  • Negotiated repairs were completed
  • Included appliances and fixtures remain
  • The seller removed unwanted belongings
  • No significant new damage occurred
  • The property is vacant if the contract requires vacancy

If the buyer finds a serious problem, the buyer should contact the real estate agent and closing agent before signing. The parties may need to negotiate a repair, credit, escrow holdback or closing delay.

What Can Delay a Real Estate Closing?

Common causes of delay include:

  • The lender has not issued final approval
  • The appraisal identifies a value or property problem
  • The title search finds a lien or ownership defect
  • Required repairs remain incomplete
  • Homeowners insurance is not in place
  • The buyer's financial documents need further verification
  • Closing documents contain errors
  • The buyer's funds have not cleared
  • The seller cannot deliver clear title
  • The final walkthrough reveals unexpected damage

A buyer should not sign documents that contain unexplained errors. The Consumer Financial Protection Bureau recommends contacting the loan officer or settlement agent immediately when a closing document is incorrect.

How Can Buyers Avoid Closing Scams?

Real estate wire fraud often involves criminals impersonating a real estate agent, lender, title company or attorney. The criminal sends fake instructions for wiring the down payment or closing funds.

To protect the money:

  1. Confirm wire instructions by calling a trusted closing professional at a previously verified phone number.
  2. Do not rely solely on instructions received by email.
  3. Treat last-minute changes to payment instructions as suspicious.
  4. Do not email sensitive financial information.
  5. If money was sent to the wrong account, contact the bank and wire service immediately.

The CFPB advises buyers to verify the account name and number with a trusted representative before sending closing funds.

What Happens After Closing?

After closing, the buyer should:

  • Store the Closing Disclosure, deed, promissory note and title insurance documents
  • Confirm the first mortgage payment date
  • Set up property tax and insurance payments
  • Update the address with banks, employers and government agencies
  • Keep records of repairs, warranties and inspection reports
  • Confirm that the deed was recorded if the closing agent provides recording confirmation