The California Mortgage and Escrow Closing Process, Step by Step

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How does the mortgage and escrow closing process work in California? How long does the real estate closing take, for home buyers? And what steps are involved in this process?

These are some of the most common questions home buyers have about real estate escrow and mortgage closing. Today, we will examine the various steps in this process, as it typically occurs in California. Just know that it can vary slightly from one borrower to the next.

Mortgage and Escrow Closing Process in California

In California, as in most states, the escrow closing process is typically the last step in a residential real estate transaction. This is when the home buyer and seller sign all of the documents relating to the sale, and when all of the funds are distributed accordingly.

For home buyers, the mortgage and escrow closing process in California involves a lot of paperwork that must be signed. The process is usually managed by an escrow company. These companies specialize in finalizing real estate deals and making sure that all paperwork has been submitted, and that funds have been distributed to the appropriate parties.

In California, escrow companies are sometimes referred to as “closing companies” as well. The two terms are used interchangeably and basically mean the same thing.

In its handbook on the subject, the California Department of Real Estate defined escrow as such:

“…escrow is the process whereby parties to the transfer or financing of real estate deposit documents, funds, or other things of value with a neutral and disinterested third party (the escrow agent), which are held in trust until a specific event or condition takes place according to specific, mutual written instructions from the parties … When the event occurs or the condition is satisfied, a distribution or transfer takes place. When all of the elements necessary to consummate the real estate transaction have occurred, the escrow is “closed”.”

Variations Between Northern and Southern California

The process itself can vary, depending on where in California you live. For example, there are some differences in how the mortgage and escrow closing process is handled in the northern and southern parts of the state.

One of the key distinctions:

  • In northern California, most real estate escrows are performed by title insurance companies.
  • In southern California, on the other hand, there’s often a separate escrow and title company involved with the process.

But that’s a broad generalization. In some cases, differences can arise from one real estate deal to the next — even within the same county or region. So be sure to ask your mortgage loan officer how it works in your area.

Basic Steps in This Process

The individual steps in the real estate and escrow closing process in California can vary for a number of reasons. Local “customs,” the type of mortgage loan being used, and other variables can affect the process.

But it usually goes something like this:

  1. A title company will perform a “title search” for the home being purchased. They do this to ensure that the seller is the true owner, and that no liens or encumbrances exist on the property. Once a “clear title” designation has been made, the closing process moves forward.
  2. Next, a title insurance policy will be prepared (if desired and/or required). There are two kinds of title insurance in California — the owner’s and the lender’s. The owner’s policy protects the home buyer from fraud, forgeries, and liens relating to the property. It gives the buyer other protections as well, but those are beyond the scope of this article.
  3. The escrow agent (or “closing agent”) receives the finalized loan documents from the home buyer’s mortgage lender.
  4. Next, the buyer will review and sign all of the relevant closing documents, including the mortgage paperwork mentioned above. This can be done in person or digitally. These days, the entire mortgage process can be handled electronically.
  5. The home buyer / borrower will then pay all remaining closing costs, minus the down payment. In some cases, buyers will pay the remaining balance in advance to expedite the process.
  6. As one of the last steps in the California escrow closing process, a government official will record the “title deed” in the buyer’s name. This recording is what officially transfers property ownership from the seller to the buyer.
  7. Once the title has been recorded, the escrow agent will pay the seller and real estate professionals whatever proceeds they are due to receive.
  8. After all of that, the buyers will receive the keys to their new home.

It bears repeating: This is how the real estate escrow closing process in California usually works. These are the steps that take place in a typical closing scenario. But your process could vary from the steps shown above, for a number of reasons.

Average Time to Close in California

Another common question is: How long does the real estate closing process take in California? This can vary for a number of reasons. (Noticing a trend here?)

During escrow, there’s a lot of paperwork flying around — digitally, in some cases. There are many documents that need to be produced, reviewed and signed. Because of this, there are quite a few things that can affect the timeline.

On average, the mortgage and escrow closing process in California can take anywhere from 30 to 45 days.

It can happen faster than that in some cases, especially when the loan officer and/or escrow manager are caught up and not suffering from a backlog of deals. It can also take longer than 30 to 45 days in some cases.

Our advice is to check with your mortgage lender up front, to find out what kind of timeframe you can expect. Then, you can create a realistic timeline for your escrow and closing process, and write it into the purchase agreement.

How Home Buyer’s Pay Their Closing Costs

Some of the costs associated with a home purchase have to be paid at the time services are provided. This is true for the property appraisal and home inspection in most cases. You cannot “roll” those charges into your closing costs. They typically have to be paid when the services are performed.

For all other closing costs, the home buyer usually pays them via wire transfer or cashier’s check in the days leading up to the closing — or on the scheduled closing day.

In the past, the buyer, seller and their real estate agents would sit around a table to review and sign documents. These days, buyers and sellers can sign their documents individually (and often digitally) by working with the escrow company. The home buyer might drop off a check at the escrow company’s office, send it by mail, or do a wire transfer.

Two Important Documents You’ll Receive

A few days before you are scheduled to close, your mortgage lender should provide you with a document called the “Closing Disclosure.”

This is a follow-up document to one that you received early on in the mortgage process, when you first applied for a home loan. At that time, you should have received a document called a “Loan Estimate.”

As its name suggests, the first document provides an estimate of the mortgage-related closing costs. The second document, the Closing Disclosure, will have a finalized list of costs that must be paid. That’s the amount you will use for your cashier’s check or wire transfer.

According to the Consumer Financial Protection Bureau (CFPB):

“Lenders are required to provide your Closing Disclosure three business days before your scheduled closing. Use these days wisely—now is the time to resolve problems. If something looks different from what you expected, ask why.”

Disclaimer: This article provides a basic overview of the mortgage and real estate escrow closing process in California. This process can vary from one home buyer to the next, due to a number of variables. Portions of this article might not apply to your particular situation. If you have questions about the process, you can refer them to your mortgage lender, loan officer, or escrow officer.