How Long Does It Take To Close On A House?
Buying a home is an exciting event. It’s a milestone many of us work hard toward and dream of from the day we’re young. But it can also be overwhelming. And one final part stands between you and homeownership: the closing process.
During the closing, you and the seller finalize your transaction. However, you might be wondering, “How long does it take to close on a house?” Here’s what you need to know to answer that important question.
How Long Does Closing On A House Take?
You can expect closing on a house to take 30 – 50 days, though closing day itself typically takes no longer than a few hours.
But closing on a house is a multistep process, which takes time. So, your experience may differ depending on the type of loan you choose and potential delays, such as repairs.
The Average Time To Close On A House, Based On Mortgage Type
Each 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 its advantages and disadvantages.
According to the Ellie Mae Origination Insight Report, it took an average of 46 days to close on a loan as of August 2021. However, each loan type carries its own time to close average based on this report.
The Ellie Mae Report claims that conventional loans took an average of 45 days to close as of August 2021.
Conventional loans tend to close quicker since they follow a traditional path from applications to closing. They generally do not include specialized underwriting, appraisal or approval requirements beyond Fannie Mae or Freddie Mac’s rules.
The Ellie Mae Report shows that FHA (Federal Housing Administration) loans took an average of 51 days to close in August 2021.
FHA loans operate on a similar timeline to conventional loans. However, they may need some additional time for some parts in the process. FHA loans require appraisals done by FHA approved appraisers, for example.
Based on the Ellie Mae Report, VA (Veterans Affairs) loans took an average of 52 days to close during August 2021.
VA loans are likely the longest in general. This is due to their stricter underwriting requirements, and only some lenders perform underwriting for VA loans. They need direct endorsement from the VA to do so.
The House Closing Process: Step-By-Step
The actual 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 Of Documents
There are a few documents waiting for you to sign on closing day, such as:
- Proof of homeowners insurance
- Closing disclosure
- The mortgage promissory note
- The deed of trust
- Certificate of occupancy
- The escrow disclosure
You want to take your time to look over the documents thoroughly. But it shouldn’t take all day. Buyers may spend up to 2 hours reviewing and signing closing documents.
2. Paying The Closing Costs
Closing on a home comes with its costs. You may need to bring a certified or cashier’s check on the day of closing to pay the appropriate amount or have your bank wire the funds instead. Because you have to prepare the payment, it’s important to know the overall cost before the day of. Some of the costs ahead 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 for some escrow In addition, they may roll a portion of this cost into your regular payments. They then go into an escrow account.
- Third-party fees: Your lender might use third parties to process your loan, which results in third-party fees like appraisal and credit report fees.
- Prepaid interest: Interest still accrues 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 are costs associated with this, such as monthly HOA fees, and you may have to pay the yearly price at closing.
- Mortgage points: Also called a discount point, mortgage points are fees you pay to lower your interest rate.
You should know how much and which closing costs you are paying before the official date. As a result, you can streamline the process, and it may only take an hour or 2. Coming unprepared may result in significant delays, though.
3. Transferring Ownership
After signing the crucial documents, including the deed, 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 receive the keys.
Unless your contract demands a delayed move-in time, you can move into the house as soon as you are able.
Transferring ownership takes a little longer than the previous steps. It may take several days or multiple weeks.
Common Delays In The Closing Process
The mortgage closing process relies on multiple factors. As a result, it’s easily stopped or delayed if an issue pops up. Here are some of the most common problems you may encounter.
If your credit score is too low, lenders may worry about your ability to repay the loan. They might take it as a sign that you will struggle with the bills. But each lender is different in the minimum credit score they want, and you can improve yours over time.
Then, the debt-to-income (DTI) ratio 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 are willing to approve. Many use a limit of 43%, although it depends on the lender.
Your lender will require a home appraisal before providing you with your mortgage loan. This can lead to delays if the home under appraises, leaving the buyer and seller to agree on new terms or if the appraiser requires repairs to the home.
Your lender needs the home to have a certain value since they use it as collateral for their loan. 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 will result in you losing your earnest money deposit.
Home Inspection Issues
Home inspections are integral to the real estate transaction process and reveal any issues. 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 it’s fixed. Delays may also occur if the buyer and seller disagree on how to fix the problem.
If that happens, the buyer can walk away. Or, the seller can offer to fix 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 a solution with the seller.
Before closing, lenders run a house title search. Through it, they can see if there are claims from other entities, called liens, taxes, or debts against your home. Most problems related to the title can be solved, but they 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 to avoid this as well.
Tips For Keeping Your Closing On Schedule
Your real estate closing timeline is more fragile than you may think. Setbacks can pop up unexpectedly, derailing the process. But there are a few things you can do to help everything move smoothly.
- Get preapproved for a loan. This will help you determine affordability and your expected price range. It can also expedite your loan application’s finalization.
- Put your documents in one place. Storing everything safely together ensures you don’t scramble to look for them later. And misplacing any can lead to delays in the closing.
- Avoid big life changes. Marriage, switching jobs, and large purchases can all affect your closing process. They introduce new factors, possible financial strain, impact credit scores, and more.
- Work with experienced professionals. From scheduling movers to borrowing from a trusted lender, the right person can make a world of difference. Discuss what’s expected from both sides before the day to avoid issues.
Frequently Asked Questions
You may still have concerns. Here are some of the most common questions homeowners have about the closing process.
How long after the appraisal does it take to close?
The timeline may vary. Generally, it takes 1 – 4 weeks to close after completing the 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, which can drag things out. And various issues can cause delays, such as missing financial information, liens on the title report or incorrect 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. Sometimes, depending on the lender, it may occur at alternative locations, like the home itself.
Closings can even take place virtually if necessary. Review expectations with your lender before the closing day.
What do I need to bring on closing day?
A few items may be necessary on closing day, such as:
- A cashier’s check for potential 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 the closing process.
Who should be present on closing day?
Any person who signed or is listed on the loan must attend on closing day. Occasionally, though, there may be extenuating circumstances. In which case, you’ll need to grant someone power of attorney who will be present in your place.
Other participants may include representation from the title company, a witness, your real estate agent and/or an attorney. It’s not always a guarantee that the buyer and seller attend the same closing, though. The full list of attendants depends on your state’s laws.
The Bottom Line
The time length 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 drag it out. But while delays can be frustrating, you can avoid them through organization and careful monitoring.
Proactivity is one of the best ways to ensure a smooth closing process. If you’re ready to jump into home buying, apply with Rocket Mortgage® today.