How Long Does It Take To Close On A House?
The process of buying a home involves several steps – from determining how much house you can afford to making a competitive offer, and more. Even after your offer is accepted, you and the seller need to finalize the details of the real estate transaction. This last leg of the home-buying journey is called the closing process.
Do you want to know how long it takes to close on a house? Let’s walk through the timeline so you know what to expect.
How Long Does Closing On A House Take?
Closing on a house is a multistep process, which requires some time. So, your experience may differ depending on the type of loan you choose and potential delays, such as documentation errors or a low home appraisal.
The Average Time To Close On A House By Mortgage Type
Every home buyer is unique and must find financing that suits their situation. As a result, there are different types of home loans, and each one comes with a different closing timeline.
According to the Ellie Mae Origination Insight Report, it took an average of 46 days to close on a loan as of August 2021. Up next, let’s take a look at how long it takes to close on three common mortgage types.
- Conventional loans: The Ellie Mae Report claims that conventional loans took an average of 45 days to close. Conventional loans tend to close quicker since they follow a traditional path from application to closing. They generally don’t include specialized underwriting, appraisal or approval requirements beyond Fannie Mae or Freddie Mac’s rules.
- FHA loans: The Ellie Mae Report shows that FHA (Federal Housing Administration) loans took an average of 51 days to close. FHA loans operate on a timeline similar to conventional loans. However, they may need some additional time for some parts of the process. FHA loans require that home appraisals be done by FHA approved appraisers, for example.
- VA loans: Based on the Ellie Mae Report, loans from the Department of Veterans Affairs took an average of 52 days to close. VA loans usually take the longest to close, in general. This is due to their stricter underwriting requirements and the fact that only some lenders perform underwriting for VA loans. These lenders need direct endorsement from the VA to do so.
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The House Closing Process And Timeline: Step-By-Step
The closing process can feel like a never-ending stream of paperwork. However, each one of these steps is crucial to purchasing your home.
1. Signing Documents
Several documents are reviewed, signed, or both on closing day. These include:
- Proof of homeowners insurance
- The closing disclosure
- The mortgage promissory note
- The deed of trust
- The certificate of occupancy
- The escrow disclosure
Take your time and examine the documents thoroughly. Buyers may spend up to a few hours reviewing and signing closing documents.
2. Paying Closing Costs
Closing on a home comes with costs. You may need to bring a certified or cashier’s check on the closing day or have your bank wire the funds. Common closing costs include:
- Down payment: Lenders typically require you to pay a portion of your home’s purchase price as your down payment. This becomes the foundation for your home’s equity.
- Escrow funds: To ensure you have sufficient money to pay future insurance and tax costs, your lender may ask you to provide upfront escrow costs. They will also roll a portion of this cost into your regular mortgage payments after closing, which then goes into an escrow account.
- Third-party fees: Your lender might use third parties to process your loan, resulting in third-party fees like appraisal and credit report fees.
- Prepaid property taxes mortgage interest: Taxes and interest accrue between the closing date and the day of your first monthly mortgage payment. So, your lender may have you pay some interest upfront to cover this amount.
- Homeowners association fees: You may move into a community with a homeowners association (HOA). There will be associated costs such as monthly HOA fees, and you may have to pay the annual price at closing.
- Mortgage points: Also called discount points, mortgage points are upfront interest you pay at closing to lower your interest rate for the life of your loan. One point costs 1% of your total loan amount and usually lowers your interest rate an average of 0.25%.
You should know how much you’re paying in closing costs and which closing costs you’re paying before the closing date. As a result, you can streamline the process and your closing may only take an hour or two. Coming unprepared may result in significant delays, though.
3. Transferring Ownership
After signing your closing documents, your ownership will be registered with your county or city. This shows up in public records and certifies that you are the property’s rightful owner. Afterward, you get the keys.
Unless your contract demands a delayed move-in time, you can move into the house as soon as you wish.
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Common Delays In The Closing Process
The mortgage closing process hinges on multiple factors. As a result, it can be easily stopped or delayed if an issue pops up. Here are some of the most common problems encountered during the closing phase.
Your lender reviews a variety of documents and numbers before approving your mortgage and home purchase. In particular, they look at your credit score and your debt-to-income ratio (DTI).
If your credit score is too low, lenders may worry about your ability to repay the loan. However, each lender is different in their minimum credit score requirements, so it’s best to take the steps to improve your score over time.
Your DTI is a measurement of your gross monthly income and how much of it goes to debt. Like the credit score, lenders have a certain number they’re willing to approve. Many allow no higher than a 43% DTI, but the percentage is ultimately at the individual lender’s discretion.
Your lender will require a home appraisal before providing you with your mortgage loan. This can lead to delays if the home appraisal is lower than expected, leaving the buyer and seller to agree on new terms if those terms haven’t already been established.
Your lender needs the home to appraise for at least the requested loan amount since they use the house as collateral for the mortgage. If your appraisal comes back low, you can renegotiate the home’s sale price, contest the appraisal, contribute more money or walk away.
Note that if you waive an appraisal contingency on your purchase agreement, canceling the contract may result in losing your earnest money deposit.
Home Inspection Issues
Home inspections are integral to the real estate transaction process and reveal any structural issues with the property. Many homes have their share of wear and tear, but if an inspector flags something that seriously needs addressing, it can delay the process until the issue is fixed. Delays may also occur if the buyer and seller disagree on how to correct the problem. If this happens, the buyer can walk away or the seller can offer to remedy the issue or negotiate a solution.
Like the appraisal contingency, if you decide to waive a home inspection contingency on your purchase agreement, you risk losing your earnest money if you can’t come to an agreement with the seller.
Before closing on a property, lenders run a house title search that allows them to see any liens, taxes or debts against the home. Most title issues can be resolved, but they may take time.
As a buyer, you can hire an attorney to help ensure you purchase a home with a clean title. Sellers need to pay off outstanding debts on the home to avoid this as well.
Tips For Keeping The Closing Timeline On Schedule
Your real estate closing timeline is more fragile than you may assume. Setbacks can unexpectedly derail the process. Consider taking the following steps to help the process move forward more smoothly.
- Organize your documents: Storing your mortgage and housing documents in one place helps you stay organized, so you don’t have to scramble to look for them on closing day. Plus, misplacing any paperwork can lead to delays during the closing process.
- Avoid big life changes. Getting married, switching jobs, taking on additional debt and making large purchases can all affect your closing process. They introduce new factors, create possible financial strain, impact credit scores, and more.
- Work with experienced professionals. From scheduling movers to borrowing from a trusted lender, the right people can make a world of difference. Discuss what’s expected from both sides before closing day to avoid issues.
FAQs: How Long It Takes To Close On A House
You may still have concerns about the time it takes to close on your new home. Here are some of the most common questions that soon-to-be new homeowners ask about the closing process.
How long after the appraisal does it take to close on a house?
The timeline may vary, but it generally takes 1 – 4 weeks to close after completing the home appraisal.
Is it possible to close in less than 2 weeks?
While it is certainly possible to close within 2 weeks, it requires a streamlined closing process. Each step has its own timeline, and various issues can cause delays – like missing financial information, liens on the title report or inaccurate appraisals.
A speedy closing requires cooperation, organization and proactive parties.
Where does closing day take place?
Most likely, your closing day will take place at an escrow office, management firm or title company. When buying a house, the closing location is the choice of the seller. Depending on the seller and the state you’re in, it may occur at alternative locations or even in a virtual setting.
It’s a good idea to review expectations with your lender before closing day.
What do I need to bring on closing day?
A few items may be necessary on closing day. These include:
- A cashier’s check (or wire payment) for all due closing costs
- An acceptable form of ID
- A copy of your homeowners insurance policy
- Your Closing Disclosure
- Contact information for important parties, like your attorney or real estate agent
Remember to review what you personally need. Coming unprepared can delay your closing.
Who should be present on closing day?
Any person who signed or is listed on the loan must attend closing day. It’s possible that extenuating circumstances could prevent you from being present on closing day, and if this happens, you’ll need to grant power of attorney to someone who will be present in your place.
Other participants may include a title company representative, a witness, your real estate agent and a real estate attorney. It’s not always a guarantee that the buyer and seller will attend the same closing, though. The full list of attendants will largely depend on your state’s laws.
The Bottom Line
The timeline to close on a home varies because it depends on several factors. Incorrectly filed paperwork, low appraisals and poor credit are just a few issues that can extend the timeline. While delays can be frustrating, you can avoid them through organization and careful monitoring.
Being proactive is one of the best ways to ensure a smooth closing process. If you’re ready to jump into home buying, fill out an application online today.
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