You don't *need* to do anything! Whatever way you choose to do it is right. I've done it both ways. Folding over is easier, but the stitching will show unless you hand-finish it. And I find that the corners are a little harder to miter that way. I think I'm a separate binding person, because I like the little extra splash of color a good binding can bring.
For the fold over, if it's a big quilt, I fold the backing in so the raw edge goes just under the batting, then fold over the rest. I double-check my width using (usually) a 2-finger rule. Any less than that and it's a pain for me. It's probably about an inch and a half.
For binding, I use 2.5", folded in half along the length and then pressed. I use a quarter inch seam for smaller quilts, and 3/8" for larger ones (leaves me a little more wiggle room when feeding through the machine). In either case, I hand-finish to the back using an applique stitch so it's invisible.
Since you have 3" left, I think you can do either method
