Closing on a home, or "settlement" is the legal process through which the possession of a home is passed from a seller to a buyer. Once a buyer has closed on a home, the sale is final and the buyer claims the title to the property, the legal document that specifies the owner of the property.

Several fees and expenses are attached to closing, in addition to the purchase price of the home. Most buyers can expect to pay about 5 percent of the home price in closing costs, but the fees can range from about 3 to more than 6 percent. When you apply for a loan, the lender is required to give a "good faith estimate" of how much closing fees will be within three business days of receiving the loan application.

The most straightforward fee the buyer must pay is called the "loan origination fee," which is paid to the lender to cover the cost of opening and processing the mortgage. The origination fee is typically about 1 percent of the loan amount, but it can be as much as 3 percent, and in some cases it is waived altogether. In addition to the loan origination fee, the buyer must compensate the lender for the preparation of documents, and pay an upfront fee to the mortgage broker for their services.

Next, the buyer must pay for the professional inpection and independent appraisal of the home, to seach for any problems that need to be fixed, and to ensure that they’re getting fair market value.

No lender will offer a loan if the buyer does not already have homeowners insurance, so it’s necessary to shop for and buy insurance before closing on the home. The other type of insurance the buyer must secure is title insurance to protect both the buyer and the lender against forgery or any other unforeseen defects in the title. Title insurance typically costs about $1,000.

Once it comes time to sign the dotted line and hand over the keys, several parties in addition to the buyer and the seller will likely be present. A closing agent or "settlement agent" should be present to witness both parties signing the necessary papers, and to ensure that all of the paperwork is in order. The closing agent represents neither the buyer nor the seller. A real-estate attorney (or two) will be present, if the buyer deems it necessary to hire one. Both the buyer’s and seller’s agents will be there, and in certain cases, a notary will be present to serve as witness.

The length of time it takes between signing an initial contract and closing on a home can be highly variable, depending on inspections, improvements, and other terms and conditions of the agreement. However, the act of closing can be done in an afternoon. In addition to exchanging the keys, the buyer typically makes a down payment at closing.

The following is a list of some of the other documents the buyer will receive at closing:

The Deed – document that transfers ownership of the home

Truth-in-lending statement – In accordance with the 1968 Truth in Lending Act, a disclosure is issued by the lender enumerating the annual percentage rate, finance charge, amount financed, and  total payments (the total amount you will have paid the lender, including interest payments and fees, once the loan is fully paid)

Promissory Note – A written promise to repay the bank according to a specific set or agreed-upon terms.

The Mortgage – A legal document that re-states the terms of the promissory note

HUD-1 Real Estate Settlement Statement – An official form that's prepared by the closing agent and distributed to both the buyer and seller, itemizing all charges and transactions.