Beginning Your Journey
Closing is the final phase of your home purchase — where you legally commit to your mortgage loan and become the official property owner. Here's what the journey looks like.
Beginning Your Journey
Your Step-by-Step Closing Guide
Follow these 8 steps from getting financially ready to receiving your keys. Each step includes what to expect and what to look out for. Bookmark this page and come back as you move through the process.
8 Keys to Getting the Keys 
Get Your Finances Ready
Before you even look at houses, you need to get your financial foundation in order. This preparation phase — ideally 6–12 months before you plan to buy — is what separates buyers who close smoothly from buyers who get derailed.
Check your credit score and understand what it means for your mortgage options. A 620 score gets you into an FHA loan; a 740+ score unlocks the best conventional rates. If your score needs work, dispute errors on your credit report, pay down credit card balances below 30% utilization, and avoid opening new accounts.
Pay down existing debts to lower your debt-to-income ratio (DTI). Lenders want your total monthly debt payments — including your future mortgage — to be below 43% of your gross monthly income. Every $500/month in debt you eliminate adds roughly $100,000 to your purchasing power.
Start saving aggressively for your down payment (3–20% of the purchase price depending on loan type) plus closing costs (2–5% of the price) plus reserves (2–3 months of mortgage payments). On a $400,000 home, that means $20,000–$100,000+ in cash at closing.
Research mortgage pre-approval requirements so you know exactly what documents you'll need: 2 years of W-2s and tax returns, 2 months of bank statements, pay stubs, and employment verification. Having these organized before you apply speeds up the process significantly.
Tip: Use our affordability calculator to set a realistic budget before you start shopping. Know your DTI ratio, understand your credit score, and have your down payment saved BEFORE you get pre-approved.
Learn About Loan Options & Get Pre-Approved
Understanding the types of mortgages available is the foundation of your homebuying journey. Each loan type — conventional, FHA, VA, USDA — has different requirements for down payment (3% to 20%), credit score (580 to 740+), and mortgage insurance. Your choice affects not just your monthly payment, but your total cost over the life of the loan.
Pre-approval is different from pre-qualification. Pre-qualification is an informal estimate based on what you tell the lender. Pre-approval is a formal process where the lender verifies your income, assets, debts, and credit history, then issues a conditional commitment for a specific loan amount. Sellers take pre-approved buyers far more seriously.
Get pre-approved by at least 2-3 lenders so you can compare Loan Estimates. Under CFPB rules, your lender must provide a Loan Estimate within 3 business days of your application. Compare APRs (not just interest rates) — the APR includes fees and gives you the true cost.
Tip: Multiple credit inquiries for mortgages within a 14-45 day window (depending on the scoring model) count as a single inquiry on your credit report. Don't be afraid to shop around.
Find a Property
Your real estate agent is your advocate throughout this process. They have access to the Multiple Listing Service (MLS), understand local market conditions, can identify properties that match your criteria, and will represent your interests in negotiations.
When evaluating properties, look beyond the cosmetics. Consider the neighborhood (schools, commute, crime rates, future development), the age and condition of major systems (roof, HVAC, plumbing, electrical), property tax rates, HOA fees and rules, and resale potential. Attend open houses to get a feel for the market — you'll learn to spot value and avoid overpaying.
Your agent can pull comparable sales ('comps') to help you understand whether a listing price is fair. In a competitive market, you may need to act quickly and make strong offers.
Tip: Don't skip the neighborhood research. Visit the area at different times of day — a quiet street at 2 PM might be a traffic nightmare at 5 PM.
Make an Offer
Your purchase offer is a legally significant document. It includes your offered price, proposed closing date, earnest money deposit amount (typically 1-3% of the price), contingencies (conditions that must be met), and any requests for the seller to pay closing costs or make repairs.
Common contingencies protect you: financing contingency (you can back out if your loan falls through), inspection contingency (you can renegotiate or exit if the inspection reveals major issues), and appraisal contingency (protects you if the home appraises for less than your offer).
The seller may accept, reject, or counter your offer. Counteroffers go back and forth until both parties agree. Once both sides sign, you have a binding purchase agreement and the clock starts ticking toward closing. Your earnest money deposit is typically due within a few days.
Tip: In competitive markets, buyers sometimes waive contingencies to make their offer stronger. Be very careful about waiving the inspection contingency — a $400 inspection can uncover $40,000 in problems.
Sign the Purchase Agreement
The purchase agreement (also called a sales contract or purchase contract) is the master document governing your entire transaction. It specifies the purchase price, closing date, what's included in the sale (appliances, fixtures, etc.), all contingencies with their deadlines, how disputes will be resolved, and each party's responsibilities.
Key sections to review carefully: the legal property description (must match the deed), the closing date and time, who pays which closing costs, the earnest money amount and where it's held (usually in the title company's escrow account), and the contingency deadlines — if you miss a deadline, you may lose your right to exercise that contingency.
While not required in every state, having an attorney review the purchase agreement before you sign is recommended, especially for first-time buyers or complex transactions (short sales, estate sales, new construction).
Tip: Read every word of the purchase agreement. If you don't understand something, ask your agent or attorney before signing. Once signed, you're legally bound to the terms.
Get Funding
After your offer is accepted, you formally apply for your mortgage (if you haven't already done so through pre-approval). Your lender will order an appraisal to verify the property is worth the purchase price, pull updated credit reports, verify your employment and income, and review your bank statements to confirm your down payment source.
This phase — called underwriting (the lender's formal process of verifying your finances and the property to decide whether to approve the loan) — is where the lender decides whether to approve your loan. The underwriter reviews everything: your debt-to-income ratio (DTI — the percentage of your gross monthly income that goes toward debt payments; most lenders want this below 43%), your credit history, the property's appraised value, and any conditions from the title search. They may ask for additional documentation (tax returns, explanation letters for large deposits, etc.).
Once the underwriter is satisfied, they issue a 'clear to close' (formal confirmation that all conditions are met and the lender is ready to fund your loan) — meaning your loan is fully approved and the lender is ready to fund. This is also when you should lock your interest rate if you haven't already. Rate locks typically last 30-60 days.
Tip: Do NOT make large purchases, open new credit accounts, change jobs, or make large cash deposits during the underwriting period. Any of these can delay or derail your loan approval.
Get Insurance
You'll need two types of insurance before closing: homeowner's insurance and title insurance.
Homeowner's insurance (hazard insurance) protects against damage from fire, storms, theft, and liability. Most lenders require at least one year's premium paid at closing, and ongoing premiums are usually collected monthly through your escrow account. Shop around — premiums vary significantly between carriers.
Title insurance protects your ownership rights. There are two types: the lender's policy (required by your mortgage company, protects the bank) and the owner's policy (optional but strongly recommended, protects YOU). The owner's policy is a one-time fee at closing — typically 0.5% to 1% of the purchase price — that covers you and your heirs for as long as you own the property.
Title searches reveal issues in approximately one out of every three residential transactions (source: ALTA). Without an owner's title insurance policy, you'd be personally responsible for legal defense costs if someone challenges your ownership — even if the claim is baseless. Legal defense alone can cost $50,000 or more.
Tip: You have the legal right to choose your own title company (RESPA). Shopping around can save hundreds of dollars. Ask about the simultaneous issue discount when buying both lender's and owner's policies from the same company.
Close the Transaction
Closing (also called settlement) is the final step. Your closing agent — a title agent, settlement agent, escrow officer, or attorney depending on your state — coordinates the entire process: gathering all required documents, calculating final figures, disbursing funds, and recording the deed.
Before closing day, you should: receive and review your Closing Disclosure at least 3 business days before closing (compare it line-by-line to your Loan Estimate), verify your wire transfer instructions BY PHONE using a number you already have (never trust emailed wire instructions), complete a final walk-through of the property, and gather your required documents (photo ID, proof of insurance, certified funds).
At the closing table, you'll sign 50-100+ pages of documents including the promissory note (your promise to repay), the deed of trust (security instrument giving the lender foreclosure rights), the closing disclosure (final costs), and various affidavits and disclosures. Your closing agent will explain each document.
Once everything is signed, funds are disbursed: the seller receives their proceeds, the real estate agents receive their commissions, and all closing costs are paid. The deed is recorded with the county, officially transferring ownership to you. You receive the keys to your new home.
Tip: Bring more than you think you need: two forms of ID, your checkbook (as backup), and phone numbers for your lender, agent, and insurance company in case any last-minute questions come up.
Key Closing Documents
Closing Disclosure
Contains all the terms of your transaction and itemized costs. Must be provided at least 3 business days before your closing date so you can review it carefully.
Learn morePromissory Note
Your written promise to repay the mortgage loan. Includes the amount borrowed, interest rate, payment schedule, and consequences of default.
Learn moreDeed of Trust / Security Instrument
Transfers conditional ownership of the property to secure your loan. If you fail to make payments, the lender has the right to foreclose.
Learn more
