How a closing works
Your settlement: what you should expect
You’ve found the home you love, the seller has agreed to your offer and now it’s time to close (also called “settle”) on your purchase. To be certain nothing goes wrong, you’ll want to work with an experienced closing agent to see that all the details come together and everything runs smoothly.
Once the seller has accepted your offer, the behind-the-scenes work begins so you can have your settlement in around 30 to 90 days. If the property you’re purchasing is in Pennsylvania or New Jersey, this is what you can expect to happen:
STEP 1: Select a closing agent
Most homebuyers rely on their real estate agent to select a closing agent—someone the real estate agent works with regularly and knows to be professional, reliable and efficient. However, you can choose your own closing agent if you wish. The closing agent will oversee the closing process and make sure everything happens in the right order and on time, without unnecessary delays or glitches.
STEP 2: Draw up an escrow agreement
First, a contract or escrow agreement is drafted, which the closing agent reviews for completeness and accuracy. The agent also puts your deposit into an escrow account, where the funds remain until your closing.
STEP 3: Conduct a title search
Once the title order is placed, the title company conducts a search of the public records, examining all recorded documents that mention the property. This should identify any issues with the title, such as liens against the property, utility easements and so on. If a problem is discovered, most often the title professional takes care of it without you even knowing about it. After the title search is complete, the title company can provide a title insurance policy guaranteeing its research.
STEP 4: Shop for title insurance
There are two kinds of title insurance coverage: a Lender’s policy, which covers the lender for the amount of the mortgage loan, and an Owner’s policy, which covers the homebuyer for the amount of the purchase price. If you are obtaining a loan, the bank or lender typically requires that you purchase a Lender’s policy. However, it protects only the lender.
To protect your investment, you should obtain an Owner’s policy. Because who pays for the Owner’s policy varies from state to state, ask your settlement agent for guidance before closing.
STEP 5: Obtain a closing disclosure
Your lender must provide you with a closing disclosure form at least three days prior to closing, which the lender may chose to do through the closing agent.
If you or your lender makes certain significant changes between the time the closing disclosure form is given to you and the closing date, you must be given a new form and an additional three-business-day waiting period after you receive the new form. This rule applies for any of these changes:
- Makes changes to the APR above ⅛ of a percent for most loans (and ¼ of a percent for loans with irregular payments or periods),
- Changes the loan product or
- Adds a prepayment penalty to the loan.
If the changes are less significant, they may be disclosed on a revised closing disclosure form provided to you at or before closing, without delaying the closing.
STEP 6: The finish line: Prepare for closing
As closing day approaches, the closing agent orders any updated information that may be required. Once the closing agent confirms with the lender and the seller, he or she will set a final date, time and location of the closing.
On closing day, all of the behind-the-scenes work is complete. While you’ve been busy packing, ordering utilities and coordinating the movers, your closing agent has been managing the closing process so that you can rest assured, knowing all the paperwork is in order and that your closing will run smoothly.
Tohickon Settlement Services
6464 Lower York Road
New Hope PA 18938
And now in Center City
One Liberty Place
1650 Market Street, Suite 3600
Philadelphia, PA 19103
And in New Jersey
372 Route 18
East Brunswick, NJ 08816