Buying a home is a process filled with both excitement and uncertainty. You may be wondering whether you’ll be able to find a home that suits all of your needs, or you may fear getting into a bidding war. Along with buying your home comes the closing process, which can be confusing to those who are not familiar with this part of the buying journey. Let’s dive into what home buyers should know about how long the closing process takes and what they can expect.
How Long Does Closing On A House Take? Typically, you can expect closing on a house to take 30 – 45 days. As of September 2021, the average time to close a home purchase was 50 days, according to the Ellie Mae Origination Insight Report. The average time to close varies based on loan type and the health of the housing market, but the variation is relatively small. A 30-day closing process means that few complexities have arisen in evaluating the buyer’s financial readiness, and in appraising and inspecting the seller’s home. Standard mortgage loans took an average of 49 days in September 2021, while Federal Housing Administration (FHA) loans, with the longest average time, took 52 days, according to Ellie Mae. With careful organization and clear communication between buyer, seller and lender, the closing process will be speedier while also saving you both money and avoiding unnecessary anxiety.
How Long Does Closing Day Take? Although you can expect the closing process to take about a month or longer, the closing day itself will only take 1 – 2 hours of the home buyer’s time. This is typically all the time you’ll need to tie up loose ends and certify your purchase, which will mark the final steps to buying a house. Keep in mind that your closing appointment can easily go over its allotted time if you’re not prepared beforehand. You should plan to enter the meeting with a form of personal identification (such as a passport or driver’s license), a copy of your Closing Disclosure and a certified cashier’s check to cover closing expenses. Here are a few tasks you’ll complete on closing day: Sign Documents On your closing day, you’ll be greeted by a pile of legal documents that require your signature. As with any legally binding agreement, it’s important to read through the information to ensure that the documents are free of errors and that you fully understand the terms. Closing documents typically include:
- The promissory note: This document shares the financial terms of your loan and serves as your agreement to repay the full loan amount.
- The mortgage note: Similar to your promissory note, the mortgage note outlines the terms of your mortgage, such as the down payment and loan total.
- The escrow disclosure: This disclosure will provide details about your escrow account and how much you’ll be expected to pay each month, including taxes and insurance fees.
- Deed of trust: Also known as a security instrument, this agreement allows your lender to foreclose or sell your property if you stop making payments.
Pay Closing Costs Closing costs, or the fees you’ll owe your lender for servicing your loan, are due at the time of your closing meeting for most home buyers. The total amount you’ll end up paying in closing fees will vary, but you can expect to see some of the following charges on your Closing Disclosure:
- Application fee for processing your loan
- Closing fees for conducting the meeting itself
- Loan origination fee for processing your loan application
- A year’s worth of homeowners insurance fees
- Home inspection fees
- Title insurance coverage
Transfer The Home Title Finally, you’ll end your meeting by transferring the home’s title into your name, which will make you the new official homeowner. A house title represents all of the legal rights surrounding the ownership and use of a residential property. It’s important to note that these rights may be limited by the law, easements, liens on the property or homeowners association (HOA) rules.
The House Closing Process, Step By Step You can expect to advance through the following stages in the house closing process: Application (1 day): This typically takes only 1 day and can be done as part of the mortgage preapproval process. However, if you’re the buyer, be sure to complete your application thoroughly and accurately, as errors or omissions could cause delays. You’ll need to list your name, Social Security number, income, address, estimated value and the amount you’ll be requesting as a mortgage home loan.
Disclosure (under 1 week): This stage typically takes a few days, and it is completed by the lender. The lender must supply the terms of the loan, including projected monthly payments, fees and other closing costs. Documentation (under 1 week): If you’re organized and anticipate the information your lender will need, this process will probably only take a few days. In this stage of the process, the lender will request documentation regarding your income and assets. If your assets come with any complications (for example, owning a rental property can complicate the picture), it’s a good idea to communicate with your lender and find out what they’re likely to need from you, and when you should send this information to them in order to expedite the process. Appraisal (1 – 2 weeks): Your lender will order a home appraisal. This means that an outside expert will view the home and determine its value. This should not be confused with a home inspection which tends to be a more in-depth examination of a home than an appraisal. Underwriting (1 – 3 days): Underwriters will evaluate your financial information to make sure you meet all of the guidelines to qualify for a loan. This includes looking at your income, savings, assets, debt and credit history, as well as verifying information about the property. Conditional approval (1 – 2 weeks): Even if the underwriting process reveals that your documents are in order, there may still be further requests for documentation. This occurs during the conditional approval stage. Again, speaking with your lender and having any documents ready will greatly expedite this process. Cleared to close (3 days): After you receive your final clearance to close and final disclosure of terms, there is a mandatory 3-day waiting period before you can return your signature, during which it is recommended that you review your terms and get expert advice if you need it. Closing and funding (1 day): After you sign, there will be one last review process, and then your mortgage will be formally recorded with your county.
Common Reasons For Closing Delays Although closing on a house can be delayed for a variety of reasons, it’s a good idea to be aware of some of the most common causes of delay. This will allow you to anticipate issues that could arise and prevent them proactively. One of the most common delays can happen during the appraisal process. Performed by an official appraiser on your behalf, appraisals help ensure that you’re paying what your new house is actually worth. If your appraisal is lower than the sale price, your lender may pause the closing process to ensure they’ll receive what they’re owed in the event of foreclosure. That means the seller will have to consider a lower selling price, or your bank will request a second appraiser’s opinion. Either option will likely stretch out your closing timeline. Aside from delays that result from the appraisal process, issues on the buyer’s end generally tend to be the cause of delays. These issues include:
- The buyer failing to deposit the down payment in a savings or checking account with enough time for the money to be traced
- Issues with the buyer’s credit report
- An incomplete loan application
- Unpaid debts
With planning and support from experts such as your lender and real estate agent, many of these issues can be resolved before they delay the closing. If, as a buyer, you are worried about a delay, you can feel empowered by the number of common delays that are within your control to prevent. There are also, however, some possible delays that can come from issues on the part of the current homeowner. These include:
- Repairs not completed as agreed/issues discovered during the final walkthrough
- Complications revealed by a title company’s title search
- Liens on the property
Inexperienced loan officers can also cause delays. This is one reason why it’s important to choose your lender carefully. If possible, you can request to have a dry closing and schedule the transfer of funds for after the completion of paperwork. This may help you avoid additional delays caused by your lender, but you’ll need to get permission from the seller ahead of time.
Advantages Of Closing Quickly You may want to close quickly in order to save a great deal of stress and hassle and to potentially lower your moving costs. Another key reason to speed up your closing is so that you can avoid extension fees for your mortgage rate lock. Mortgage rate locks allow you to secure your mortgage rate, so you don’t have to worry about rates rising as you finish the closing process. However, if you exceed the term of the lock, you may have to pay your lender a percentage fee. Keep in mind that losing a rate lock can result in paying more interest over the term of the loan, especially if rates are on the rise. That’s why it’s important to start the home buying process and get locked in while rates are still low.
The Bottom Line: Closing Day Preparation Pays Off
While the home closing process usually takes 30 – 45 days, you should be prepared to close as quickly as possible. Although some delays are unavoidable, you can do your part to ensure a seamless closing by fulfilling all unpaid debts, preparing all the required signing documents and depositing the down payment on time.