At a closing, ownership of the newly purchased home is officially transferred from the seller to you. It involves you, the seller, the real estate agent, representatives from the title or escrow firm, clerks, secretaries, attorneys and other staff. It is possible to have an attorney act on your behalf if you cannot attend the meeting (for example, if the house is in another state).
Closing can take as little time as an hour to sign all the forms and transfer ownership or it can take several hours, depending on the contingency clauses in the purchase offer (and any escrow accounts that may need to be set up).
Much of the paperwork involved in closing (or settlement) is done by attorneys and real estate professionals. You may be involved in some of the closing activities and not in others, depending on local customs and on the professionals with whom you are working.
Before you close on the house, you should have a final inspection, or walk-through, to make sure any repairs you requested have been made and that items which were to remain with the house (drapes, light fixtures) are still there. More information can be found on our Closing Checklist.
In most states, settlement is done by a title or escrow firm to which you forward all the materials and information along with the appropriate cashiers' checks, and the firm will make the necessary disbursements. The real estate
agent or another representative of the title company will deliver the check to the seller and the house keys to you.
Additionally, you can find more information on Lender411.com if you would like a more detailed explanation and break down on closing costs .
Real Estate Settlement Procedures Act (RESPA)
The Real Estate Settlement Procedures Act (RESPA) contains information on the settlement or closing costs you are likely to face. Within 3 days of the time you apply for the mortgage, your lender is required to provide you with a "good faith estimate of settlement costs", based on his or her understanding of your purchase contract. This estimate should give you a good idea of how much cash you will need at closing to cover pro-rated taxes, first month's interest, and other settlement costs.
The act also requires lenders to give you an information booklet: Settlement Costs Booklet, written by the U.S. Department of Housing and Urban Development, which discusses how to negotiate a sales contract, how to work with various professionals (attorneys, real estate agents, lenders), and your rights and responsibilities as a home buyer. It also shows an example of the uniform settlement statement that will be used at your closing.
One business day before you close, you are entitled to see a copy of the Uniform Settlement Statement with your figures on it so you will know just how much the final costs will be.