To own property in the United States, you choose how title will be held, sign a purchase contract, meet your lender’s requirements, and then sign and record a deed at closing that puts the property in your name. Each of those steps carries legal consequences that outlast the transaction: how you take title shapes what happens if you die or divorce, the type of deed you receive determines what you can sue over if a title problem surfaces, and the closing documents lock in your loan terms and tax position for years. Working through the steps in order, with the right paperwork, is how ownership actually transfers.
Choose How You Will Hold Title
Title is the legal recognition of ownership, and the form you choose controls who can sell, who inherits, and which creditors can reach the property. Five forms cover almost every residential purchase.
Sole Ownership
One person holds the entire interest with no shared claims. You can sell, mortgage, or give away the property without anyone else’s approval. If you die without a will, the property passes through your state’s probate process, which can be slow and costly for your heirs.
Joint Tenancy
Two or more people hold equal shares at the same time, with a right of survivorship: when one joint tenant dies, that share automatically passes to the surviving owners outside probate. Most states require that all owners take their interest at the same time, through the same deed, in equal shares, and with equal rights to possess the whole property. If a joint tenant sells their share to an outsider, the joint tenancy is typically severed for that share and becomes a tenancy in common.
Tenancy in Common
Multiple people own different percentages of the same property. One person could hold 60 percent while two others each hold 20 percent. There is no right of survivorship. Each owner can sell, mortgage, or bequeath their share without the others’ consent, and when a co-owner dies, that share passes under a will or state intestacy rules.
Tenancy by the Entirety
This form is available only to married couples and only in states that recognize it. The couple holds the property as a single legal unit, so neither spouse can sell or mortgage without the other’s consent. In most states that allow it, a creditor with a judgment against only one spouse cannot force a sale. When one spouse dies, the survivor automatically owns the whole property.
Community Property
Nine states follow community property rules: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Most property acquired during the marriage belongs equally to both spouses regardless of whose name is on the deed, and both spouses generally must sign any deed or mortgage affecting community property.
Community property carries a tax advantage when one spouse dies. Federal law lets the surviving spouse receive a full step-up in the property’s tax basis to fair market value covering both halves, not just the deceased spouse’s share.1Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent Property held in joint tenancy receives only a half step-up. That difference can save tens of thousands in capital gains taxes when the survivor eventually sells.
Know Which Deed You Are Receiving
The deed is the legal document that transfers ownership. Not all deeds offer the same protection.
- General warranty deed. The strongest buyer protection. The seller guarantees clear title and covers undisclosed liens, claims, or defects even from before the seller owned the property. If a title problem surfaces later, you can sue for breach of warranty. Most standard home sales use this deed.
- Special warranty deed. The seller guarantees clear title only for the period they owned the property. Problems that predate their ownership are not covered. Common in commercial and bank-owned sales.
- Quitclaim deed. Transfers whatever interest the seller has, if any, with no promises about the title’s quality. Used mainly between family members, divorcing spouses, or to clear up title defects, not in typical arm’s-length purchases.
Get Your Finances Ready
Before shopping, you need a financial picture that meets lending standards. Lenders evaluate income, assets, debts, and credit to decide how much they will lend and at what rate.
Documents You Will Need
Most lenders want at least two years of federal tax returns and W-2s. Self-employed borrowers should expect to provide three years of personal and business returns plus a current profit-and-loss statement. Bank statements covering the most recent 60 to 90 days prove that your down payment and closing funds are available and traceable; unexplained large deposits can trigger extra scrutiny. Recent pay stubs and authorization to pull your credit round out the file.
Credit Score Thresholds
Your score determines which loan programs you qualify for and directly affects your rate. FHA-insured loans require a minimum score of 580 with a 3.5 percent down payment; borrowers with scores between 500 and 579 must put down at least 10 percent.2HUD. Does FHA Require a Minimum Credit Score and How Is It Determined Conventional conforming loans typically require a minimum of 620, though many lenders prefer 640 or higher for the best rates.
Pre-Approval and Insurance
A mortgage pre-approval letter is a formal statement from a lender confirming the loan amount you qualify for based on verified financials. Sellers and their agents take offers with a pre-approval attached more seriously. Before making an offer on a specific property, review the preliminary title report; it reveals existing liens, easements, or other encumbrances that could limit your use of the land or complicate closing.
Lenders also require homeowner’s insurance as a condition of the loan. No federal law mandates the coverage, but the lender has a financial stake in the property and will not fund without proof of it. Budget for this early, because the first year’s premium is typically due at or before closing.
Sign a Contract That Holds Up
The purchase contract is the binding agreement that controls the whole transaction. Errors here can cloud title, delay closing, or expose you to a breach claim.
The contract must include the full legal names of all buyers and sellers. The property description should use the precise language from prior recorded deeds, either a metes-and-bounds description tracing the boundary with distances and directions, or a lot-and-block reference tied to a recorded subdivision map. A street address alone is not legally sufficient.
The contract states the purchase price, the amount of earnest money deposited into escrow, and the target closing date. Earnest money is the good-faith deposit and commonly runs one to three percent of the sale price. If the buyer walks away without a valid contractual reason, the seller can typically keep the earnest money as liquidated damages. If the buyer backs out under a valid contingency, such as a failed inspection or inability to secure financing, the deposit is returned.
Confirm that the contract specifies which contingencies apply, the deadlines for satisfying each one, and which fixtures stay with the property. Official contract forms are available through state-licensed real estate boards and should be reviewed by an attorney in states that require or recommend legal representation at closing.
Budget for Closing Costs
Total closing costs for a residential purchase generally run between three and six percent of the loan amount and cover lender fees, third-party services, and government charges.
Lenders require a professional appraisal to confirm the property is worth the amount being financed. For a standard single-family home, appraisal fees typically range from roughly $500 to over $1,000 depending on size, location, and complexity. Multi-unit properties cost more.
Title insurance protects against undiscovered problems in the property’s ownership history, such as forged signatures in a prior deed, unknown liens, or recording errors. A lender’s policy protects the bank’s interest and is required by most mortgage lenders. An owner’s policy protects your investment and is optional but strongly recommended.3Consumer Financial Protection Bureau. What Is Owners Title Insurance Combined title-related costs vary significantly by property value, location, and loan type.
Many states and some local governments charge a transfer tax when a deed is recorded, though roughly a dozen states impose no state-level transfer tax. Rates in states that charge one range from a fraction of a percent to about three percent of the sale price, and some jurisdictions add county or municipal taxes on top. Recording fees, charged for filing the deed in county land records, typically run from around $30 to several hundred dollars.
Get Through Closing and Recording
The Three-Business-Day Disclosure
Federal regulations require your lender to deliver the Closing Disclosure, a detailed breakdown of your final loan terms, monthly payment, and closing costs, at least three business days before the closing date.4eCFR. 12 CFR 1026.19 – Certain Mortgage and Variable-Rate Transactions Use that window to compare the Closing Disclosure against the earlier Loan Estimate and flag unexpected changes. If the lender raises your APR beyond a set threshold, adds a prepayment penalty, or changes the loan product, the three-day clock resets with a corrected disclosure.5Consumer Financial Protection Bureau. Know Before You Owe – 3 Days to Review Your Mortgage Closing Documents
Walkthrough and Settlement
Closing usually begins with a final walkthrough of the property, generally 24 to 48 hours before settlement, to confirm the home is in the agreed condition and that promised repairs are complete. At the settlement table, an escrow agent or title officer coordinates the exchange: collecting purchase funds, paying off the seller’s existing mortgage, distributing proceeds, and routing fees to third parties.
The seller signs the deed transferring ownership. You sign the mortgage note (your promise to repay), the mortgage or deed of trust (the lender’s security interest in the property), and the Closing Disclosure along with other federally required forms.6eCFR. 12 CFR 1026.38 – Content of Disclosures for Certain Mortgage Transactions Once documents are signed and funds verified, the escrow agent submits the original deed to the county recorder.
Recording and Final Title
Filing the deed creates a public record of the new ownership, which protects you against future claims from outside parties. The title company then issues the final title insurance policy. Once the recorder stamps the document with a book and page number, the transfer is legally complete, and you typically receive the original recorded deed by mail.
Buying From a Foreign Seller
If you are buying property from a foreign seller, federal law requires you to withhold 15 percent of the sale price and remit it to the IRS under the Foreign Investment in Real Property Tax Act.7Internal Revenue Service. FIRPTA Withholding Failing to withhold can make you personally liable for the tax. Your closing agent typically handles the paperwork, but the legal responsibility is the buyer’s.
Know Your Federal Protections
The Real Estate Settlement Procedures Act prohibits anyone involved in a mortgage transaction from paying or receiving a fee solely for referring you to a particular settlement service provider, such as a title company, appraiser, or insurance agent. Fees are allowed only for services actually performed.8Consumer Financial Protection Bureau. 12 CFR 1024.14 – Prohibition Against Kickbacks and Unearned Fees If you suspect a referral fee inflated your closing costs, you can file a complaint with the Consumer Financial Protection Bureau.
One protection does not apply here. Federal law provides a three-day right to cancel certain credit transactions secured by your primary residence, but that right does not cover a purchase mortgage.9Office of the Law Revision Counsel. 15 USC 1635 – Right of Rescission as to Certain Transactions It applies to refinances, home equity loans, and HELOCs. Once you close on a purchase, the transaction is final.
Plan for the Tax Consequences
Mortgage Interest Deduction
If you itemize, you can deduct interest paid on up to $750,000 of mortgage debt used to buy, build, or substantially improve your primary home or a second home ($375,000 if married filing separately).10Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction Mortgages taken out before December 16, 2017, qualify under the older $1 million limit. The $750,000 cap was made permanent by the One Big Beautiful Bill Act, signed on July 4, 2025, and is not adjusted for inflation.
State and Local Tax Deduction
Property taxes you pay to your local government can be deducted as part of the state and local tax (SALT) deduction, but only if you itemize. The SALT deduction, which combines property taxes with either state income taxes or state sales taxes, is capped at $40,400 for 2026 ($20,200 for married filing separately). The cap phases down for taxpayers with modified adjusted gross income above $505,000 and is scheduled to revert to $10,000 beginning in 2030 under current law.
Capital Gains When You Sell
When you sell your primary residence, you can exclude up to $250,000 of profit from federal income tax ($500,000 for married couples filing jointly).11Internal Revenue Service. Sale of Your Home To qualify, you must have owned and lived in the home as your main residence for at least two of the five years before the sale.12Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence You cannot claim the exclusion more than once every two years. A surviving spouse who sells within two years of the other spouse’s death can still claim the full $500,000 exclusion if the couple would have qualified immediately before the death.
Reporting the Sale
The settlement agent handling your closing is generally required to file IRS Form 1099-S reporting the proceeds, unless the total received is less than $600.13Internal Revenue Service. Instructions for Form 1099-S – Proceeds From Real Estate Transactions Even if the gain is fully excluded, the transaction may still be reported. Keep records of your purchase price, closing costs, and any capital improvements; they increase your tax basis and reduce the taxable gain if your profit ever exceeds the exclusion.