Some people may associate closing with sitting in an office and signing reams of paper, but in actuality, closing is all of the steps that finalize a home purchase. It begins with the offer to purchase.

Offer to purchase:

When you find a dream home that fits your budget, make your offer. Depending on the market trend, you may be able to offer as much as 10 percent under the sellers’ price.

Deposit or earnest money:

This amount is typically 1 percent of the purchase price and is part of the offer to purchase. The real estate agent or a seller representative keeps the 1 percent in a trust until the purchase is final, and the money is applied to the down payment. If you rescind your offer, it is possible that you lose your deposit and that the sellers sue you for damages. If sellers reject the purchase offer, you get the money back.


Buyers generally must get financing and a home inspection within certain time frames; for example, they usually have 10 to 14 days for the inspection after the contract is accepted.

Home inspection:

An inspector examines the home for potential or existing structural and mechanical issues.


The contract is signed after the seller accepts the buyer’s purchase offer, and it includes the contingencies. It also includes a property description, the price of the deal, closing and possession dates.

Settlement sheet:

The Department of Housing and Urban Development mandates this document. It includes all of the monetary facets that go into selling and purchasing a home. It details the funds paid at closing and includes information on the agents’ commissions and the escrow amounts. According to the Real Estate Settlement Procedures Act, both the buyer and seller must get a copy of the settlement sheet at least one day before settlement.

Closing paperwork:

This aspect includes a title search to ensure there are no liens or holds on the property, obtaining title insurance and getting homeowners insurance.


Final closing costs usually include the mortgage loan origination fee, appraisal costs, credit report costs, inspection fee, mortgage broker costs, tax payments and document preparation costs.

Practical matters:

Homeowners set up utility services and arrangements for their initial mortgage payment.


Buyers pay the down payment, which is the rest of what they owe, and on the date of possession, the title is transferred.