At Scott Title Services in Shrewsbury, NJ, we realize that buying or selling a home is a complex and stressful process with many moving parts and issues that need to be resolved, documented and filed before the transaction can take place. We work with you to ensure the settlement process (also called the closing process) goes as smoothly as possible. Our experts scrutinize every step and aspect of your transaction, from the investigation of the title to document preparation to the final closing, so that you can focus on the big picture. You may feel more comfortable having a general idea of what the steps are in the closing process. We’ll give you a general overview of what you should expect.
Important Steps of the NJ Closing Process
The closing process can sometimes take several weeks to complete from the first steps to the final walk-through. This is a general breakdown of what steps you will take during this time period. Not every step will apply in every home sale, nor will they always occur in exactly the same order, but, in general, these are the steps of the closing process.
Sign the Purchase Offer
The purchase offer is the document that will set the closing process in motion. This document holds every detail about how a home will change hands, including what appliances and furnishings are staying in the home and which things the seller is choosing to take with them. This document also sets deadlines for the rest of the closing process.
Attorney Review
After the purchase offer is signed by both parties, the 72-hour attorney review period begins. During this time, lawyers for both the buyer and seller will go over the contracts, and can negotiate any changes to the terms (if necessary). If an agreement regarding the terms of the contract or any proposed changes cannot be reached, and it is still within the three-day review period, you are allowed to walk away from the sale without risk of penalty or consequence.
Perform a General Inspection
Buying a home without an inspection is a gamble, so most buyers are going to get one. There’s only so much the untrained eye can uncover during the initial showing. This will give buyers the opportunity to make sure the systems in your home are in working order and that there are no major problems with the property.
You may also consider additional specialized inspections. If anything is found in these inspections, you can negotiate how to resolve issues before moving any further in the closing process.
Mortgage Application
Acquiring a mortgage is a critical component of the home-buying procedure, and it should begin as soon as possible, as it is a thoroughly lengthy and precariously difficult step. While each facet of the mortgage application and approval process provides its own challenges, there are few concerns more crucial than remaining as financially stable as possible (such as not changing jobs), lest you risk being rejected and having to start the whole thing over.
Open Escrow for Funds and Documentation
There is a lot of money and many important documents that are involved in buying and selling a home. An escrow agent will be able to open up an escrow account to temporarily hold the money and documentation from both parties.
Clear the Title
If you are buying a home, you’ll want to make sure there aren’t any loans, liens, or claims on the title that could pop up in the future and cause problems. A property title search will be able to uncover any of these potential issues before you finalize the purchase on the home.
Acquire Title Insurance
Title insurance protects the holder from damages or losses that could occur if there are issues with a property’s title. Although title insurance for owners is optional in New Jersey, the protection it offers from unforeseen defects and dilemmas makes it highly recommended.
Sign the Closing Paperwork
The paperwork you’ll need to sign at closing varies by state and county so connect with your agent for the exact forms your market and situation require. These documents typically include, but are not limited to:
- The property deed
- Affidavit of title
- Settlement statement
- Closing disclosure
- 1099-S tax form
Once this is completed and all the contracts and escrow paperwork have been finalized and the money has exchanged hands, the process is complete!
What to Prepare for the Closing Process
You don’t want to show up to the closing unprepared. A few days before the scheduled date, gather all the paperwork you’ve filled out over the course of the home buying process. This may include:
- Contract signed by your real estate agent
- Inspection and home appraisal reports
- Proof of title and title insurance provided by your title agent
- Good-faith estimate (GFE) from your lender
Other items you may need to bring to the closing include:
- Two forms of valid photo identification.
- Necessary closing funds in the form of a cashier’s check, treasurer’s check, or wire transfer.
- Homeowner’s insurance policy with a paid receipt.
It is also important to take steps to protect yourself from cyber risks during the home closing process. Real estate-related cybercrime has continued to grow over the past few years. Talk to your real estate professionals about precautions you can take to transfer information securely.
Who Should Be Present at the Closing?
Here is a list of people who may be present at the closing, depending on the circumstances:
- Buyer
- Seller
- Real Estate Agents (Buyer and Seller)
- Lender Representative
- Title Agent
- Attorneys
Traditionally, closings are done in person with all parties involved in the transaction present to sign all necessary documents. However, online remote closings are becoming more and more popular and have certain advantages over traditional closing.
Understanding the Closing Costs
It is important to carefully keep track of the various costs you may need to pay throughout the home buying process. These costs can include, but are not limited to:
- Application fees
- Appraisal fees
- Attorney fees
- Courier fees
- Credit Report fees
- Escrow fees
- Home Inspection fees
- Origination fees
- Recording fees
- Title Insurance Premium
- Title Search fees
- Prepaid interest
Closing Process Paperwork
At the closing, you will be required to review and sign various documents. Some of these may include:
- HUD-1 Settlement Statement
- Truth in Lending (TILA) Statement
- Mortgage Note
- Mortgage or Deed of Trust
- Certificate of Occupancy
Here are some sample documents to familiarize yourself with the paperwork you might see before the closing arrives:
- Sample HUD-1 Settlement Statement
- Sample TILA Statement
- Sample Mortgage, Deed of Trust, or Security Deed
How to Make Your Home Closing Process a Smooth One
While the closing process may seem daunting, there are a few steps you can take to ensure a successful closing.
- Work with only trusted real estate professionals who will help guide you through the process and be available to answer all of your questions.
- Take steps to protect yourself from cybercrime such as wire fraud. Discuss these precautions with your real estate professional and IT support company, if applicable.
- Arrive at the closing prepared with all necessary fees and documents. Take your time, and don’t be afraid to ask questions if you aren’t clear on what you are signing.
Once the closing process is complete, you’ll be given the keys to your new home.