Closing On A House? Here’s How Long It Takes – Forbes Advisor

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As a borrower, waiting for closing can feel like agony—especially if you’re trying to close on a house and you’re ready to move, or if you urgently need the savings a refinance will give you.

Throughout most of the closing process, you’re waiting on other people, and you often don’t know how far along they are on what you need them to do. Has the underwriter looked at your file yet? Has your employer returned the underwriter’s call to verify your job status? What’s taking the appraiser so long to decide what the home is worth?

While you can’t control other people, removing some mystery from the closing process by learning how long it takes and why might make all the waiting less stressful for you.

How Long Does It Take to Close on a House?

First, let’s distinguish between how long it takes to close on a house and how long it takes to close on a mortgage.

Time to Close When You’re Buying a House with Cash

If you’re paying cash for a home, closing can be much faster than if you’re financing it because you can eliminate all the steps associated with mortgage approval: underwriting, the appraisal, and the three-day period associated with the mortgage closing disclosure.

You don’t even have to order title insurance or a home inspection, though you’d be foolish to skip those steps. Closing on an all-cash purchase can happen in a matter of days. All you have to do is transfer funds, legally change ownership and get the keys.

Time to Close on a Mortgage

Once a mortgage is involved, the timeline to close typically expands to 30 to 60 days; On a purchase mortgage tends to close a few days faster than closing on a refinance. The stakes for closing late on a purchase are higher, so everyone tends to be more motivated to move quickly and keep the process on schedule. Closing late can affect the seller’s plans or leave the buyer without a place to live, among other issues.

Mortgage type also affects time to close. Government-backed loans take longer to close than conventional loans. Market conditions also have a big impact on how long it takes to close on a mortgage, as the table below shows. Look what Covid-19 did to closing timelines, and note how refinancing isn’t always slower than purchasing. The table also shows the difference between closing on a purchase vs. refi and closing on different types of loans.

The pandemic slowed the closing process, as many lenders needed time to transition their teams to remote work and their business model to incorporate an online application process. On top of that, interest rates were lower than ever, creating increased demand.

However, some lenders advertise closing timelines that are far better than average by pre-underwriting your mortgage, an up-front process that is more in-depth than preapproval.

How a Mortgage Closing Works

On a purchase, the closing process begins after a seller accepts your offer to buy their home, and it ends when your loan has been funded, the transaction has settled and you get the keys to your new home.

If you’re refinancing, the closing process begins once your application has been accepted and ends when you’ve signed your closing paperwork—but the transaction isn’t complete until the rescission period expires. That takes three business days, and then your lender can fund your new loan and pay off the old one.

At least three days before closing, your lender must give you your closing disclosure. It’s the companion to the loan estimate you received after you applied for your home loan, and you should compare the two documents to keep your lender honest.

Your lender is not required to provide your closing paperwork in advance, but if they don’t volunteer it, you should ask. There’s no reason you should have to peruse these documents under pressure on the day you’re supposed to close. By getting them in advance, you will have more time to find mistakes, develop questions and get them corrected and answered without delaying your closing.

In-person Closing vs. Digital Closing

The pandemic increased the availability of digital mortgages and online closings. In more than half of US states, you can even have your closing documents notarized remotely via videoconference. You also can sign the paperwork that doesn’t need to be notarized remotely and electronically using a service such as DocuSign that your lender will select and arrange.

This process can be faster and more convenient than the old-fashioned method, which involves in-person meetings and delivery of physical documents. Even FedEx can’t beat the speed of digital. But the next-best thing where a 100% online closing isn’t available, or if you’re uncomfortable with it, is to use a mobile notary who will come to your home or meet you in a mutually agreeable place.

What Could Delay Your House Closing

There are several parts of the mortgage process where delays can occur. Any of these can push back the closing date.

1. Lenders Are Busy

Delays are more likely when mortgage application volume is high, because anyone working on your closing can get back up with too much work. It can be hard to schedule an appraisal or a home inspection if those professionals are booked solid. Many people trying to buy a home or refinance during the pandemic had this experience.

2. The Appraisal Comes in Too Low or Reveals Repair Requirements

If the home appraisal comes in lower than the purchase price, the transaction can’t proceed until one of three things happen:

  • The seller lowers the price.
  • The buyer gets a second opinion and that opinion results in a higher home value.
  • The buyer puts more money down.

The appraiser will also note whether the home is in good enough condition to meet the standards of the loan you’re applying for. If it’s not, the seller will need to bring it up to those standards or you’ll have to start over with a home renovation mortgage such as the FHA 203(k) loan, the CHOICERenovation loan or the Homestyle Renovation loan.

3. The Home Inspection Uncovers Potential Dealbreakers

Problems revealed during the home inspection can delay closing by requiring the buyer and seller to negotiate further to choose one of these options:

  • The seller will make repairs before closing.
  • The seller will give the buyer a credit at closing to make the repairs after closing.
  • The seller will lower the sale price to account for the repairs.
  • The seller will do nothing but the buyer will proceed anyway.
  • The buyer or seller will cancel the transaction.

4. The Home Is Difficult to Insure

Homes at high risk of damage from natural disasters or with an extensive claims history may be difficult or expensive to insure. For example, Florida homes often have this problem due to the state’s susceptibility to hurricanes. Since mortgage lenders require homeowners insurance (and you’ll want it to protect yourself anyway), insurability problems could delay or derail your closing.

Ask the seller for the property’s Comprehensive Loss Underwriting Exchange (CLUE) report early in the process to give yourself more time to deal with any problems. Also ask who their homeowners insurance company is and how much they pay, keeping in mind that you could pay more or less depending on how much coverage you want and the deductible you choose.

5. The Property’s Title Isn’t Clear

If you’re getting a mortgage, whether you’re buying or refinancing, your lender will order a title search and you’ll have to purchase a lender’s title insurance policy. You’ll have the option to purchase an owner’s title insurance policy, too, which experts recommend doing to protect yourself.

Sometimes the title search company can quickly clear up any problems with the title that could prevent you from having undisputed ownership. Other times the fix could delay your closing or cause the deal to fall through.

6. Your Credit Report Changes

Don’t open a new credit card or take out another loan, and don’t run up the balance on any of your credit cards during the closing process. These actions could lower your credit score or worsen your debt-to-income (DTI) ratio to the point where you no longer qualify or will have to pay a higher interest rate.

7. You Make Unusually Large Account Deposits or Withdrawals

Keeping your finances stable throughout the closing process will help keep your closing on track because you won’t need to provide additional documentation to lenders justifying large deposits or withdrawals.

Why would a large deposit be a problem? Because it could indicate you borrowed money that you’ll have to repay, which will affect the DTI you qualified for the loan with. A large withdrawal could mean you won’t have enough cash to close or you won’t have the required cash reserves after closing.

Don’t forget that you’ll need cash for both your down payment and closing costs.

8. Your Interest Rate Lock Expires

If your interest rate lock expires before your loan closes, and if market conditions have changed such that your new rate or closing costs will be higher, the worst-case scenario is that you’ll no longer qualify for your mortgage. If you still qualify but your annual percentage rate (APR) will change by more than one-eighth of a percent and the lender has already issued your closing disclosure, the clock will restart on the three-day waiting period before you can finalize your loan .

9. The Final Walk-through Is Problematic

Ideally, the property will look the same or better during your final walkthrough than when you originally toured it. But if something is wrong—the home has been vandalized, the sellers haven’t completed the repairs they agreed to or the sellers have moved out with appliances the contract states were included in the sale—you could end up closing late.

How to Keep Your Closing Timeline on Track

Closing a home loan requires coordinated efforts from many people, and the only person whose speed you can control is your own. So any time the ball is in your court, return it as quickly as possible. Underwriter needs a bank statement? Pull it from your online account and send it over ASAP. Appraiser needs to reschedule? Get yourself rebooked before their other cancellations beat you to it.

Here are some more specific tips for closing on schedule:

  • Gather paperwork in advance. Make sure you have copies of your two most recent pay stubs, bank statements and tax returns. Your lender may need additional documents, but being prepared with the basics can speed things along.
  • Avoid applying for new credit. Don’t apply for a new credit card, personal loan, auto loan or any other type of loan while you’re waiting for your loan to close. Also don’t co-sign anyone else’s loan because doing so makes you legally responsible for the entire debt. Any new debt will worsen your DTI ratio and require underwriting to take another look at your file.
  • Don’t change jobs. Don’t change jobs or quit your job during the closing process. What happens if you get a great offer from a different company that you can’t refuse? Talk to your lender about how to prevent it from derailing your closing.
  • Get a long enough rate-lock period. Yourer should be able to tell you lend at the start how long they are typically taking to close loans. If they say 30 days, you might want to lock your interest rate for 45 days to be on the safe side, even if you have to pay a bit extra.
  • Don’t switch mortgage lenders. Switching lenders is one of the worst things you can do if you want to close on time because so many steps of the loan process will need redoing. Still, if you’ve determined that you’re not getting a good deal from your current lender, it might be better to walk away than to resign yourself to an overpriced loan.

Before taking that last step, discuss the situation with your real estate agent and have them discuss the situation with the seller if you don’t want your purchase to fall through. You’ll need to negotiate a new closing date and you may have to compensate the seller for the inconvenience. If they’re not willing to work with you, you may lose your earned money deposit, making the savings from changing lenders a wash.

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