If you’re thinking of buying your first home you are no doubt wondering about the closing process and how long it takes. Well, the reality is that it’s not a speedy process — but it’s a rewarding one all the same.
Once you receive your new house keys, the waiting game is all worth it. But how long does it take to close on a house and why? There are a number of factors that affect the process, including the time of year, the home buying market, the buyer’s loan type, and more.
If you want to dive deeper into the closing process, check out the rest of this blog for an in-depth look at the timeline you can expect.
What Does It Mean to Close on a Home?
Home closing refers to those who are both selling a home or looking to buy one. Only once an offer is made, or you’ve placed your offer on a home does the closing process begin.
The only way you can guarantee a pretty speedy closing process is if you receive or offer an all-cash deal. Or, if your home falls into a category of expired real estate listings.
In other words, if your home has been on the market beyond the agreed contract time, it becomes all the more enticing to investors.
Other than that, closing on a home is probably the most time-consuming part of buying or selling.
But what does closing on a home actually involve?
In short, this is the finalization of the loan on a home and the transfer of ownership from the seller to the buyer. During this process, you pay closing costs then receive the keys to your new home.
Even though you have the chance to put forward your ideal closing date when you write up your offer on a home, it doesn’t always pan out that way.
As mentioned, there are a number of factors that affect the process, most importantly, how long your mortgage lender takes to process the loan.
How Long Does It Take to Close on a House?
It’s best to be realistic about the closing time on a new home. While your realtor may tell you it will take a month, it will probably take longer than that.
In order to best prepare yourself for the wait, give yourself an average time frame of 7-8 weeks for purchases financed by a home loan.
When you fill out your mortgage application you have the option of selecting a 30 day period for closing on escrow. This may be your ideal timeframe, but it’s not always guaranteed.
There are specific waiting periods that affect processing. As well as certain transactions that depend on third-party providers.
If you have a complex scenario related to your income, this will affect your loan processing time, too. Keep in mind that home appraisal turnaround times are out of your control.
If you’re selling a home and want to speed up the process of home appraisal, make sure to be upfront about its weak points.
Here’s a more in-depth breakdown of the process and the timeline:
1. Submitting Your Application
Once you make an offer on a home and it’s accepted, the loan process kicks off. You’ll start off by filling in an official loan application.
This is a fairly simple step. All you need to provide is your name, social security number, income, property address, the estimated home value, and your preferred loan amount.
The type of form you need to complete is generally a Uniform Residential Loan Application (URLA). It’s a 5-6 page document that’s processed by an underwriter.
You may be asked to fill in the rest of the information telephonically, or you can fill it out online. Submitting your mortgage loan application takes one day, and signifies the first day of the process.
2. Issue of Loan Disclosure
Once you submit your application, your loan provider must provide you with an official loan disclosure, by law. This includes a loan estimate and it can take up to three days for you to receive this information.
You’ll most likely receive your disclosure electronically via a secure link or portal. It will require an electronic signature, too.
If you are not sent an online disclosure, you will receive paper copies of it in the mail within a few days. Naturally, this can add to the waiting period too.
3. Gathering of Additional Documentation
This is another process that will take a few days. Basically, your mortgage lender will ask for supporting documentation about your assets and income in order to submit your application for underwriting,
Sometimes, you may be asked for more information, i.e. your tax returns if you already own another rental property.
All-in-all, requesting, gathering, and reviewing documentation should take between 3-4 days.
4. Ordering Your Appraisal
This is a crucial part of the closing process. But your lender can only order your appraisal once you’ve provided a signed Intent to Proceed form.
You want your lender to order your appraisal as soon as possible. This is because the process goes through a third-party service, i.e. an approved and licensed independent appraiser.
So the quicker you submit your Intent to Proceed form and your lender orders your appraisal, the better.
The appraisal process can also be a little time-consuming. It involves the scheduling of a home inspection, performing the inspection, and then preparation of the report.
After this, the report is reviewed by an appraisal management company for control checks. It’s then returned to your lender.
You can expect this entire process to take about 1-2 weeks in total. If you live in a remote/rural location or you’re buying in a remote location, it could take longer.
If you’re selling your home, you want to do a little TLC on it just before the appraiser makes their visit. This can increase your chances of receiving a home appraisal of decent value!
5. Loan Underwriting
Before your loan is accepted by a mortgage lender, your income, assets, property, and credit rating are thoroughly reviewed. This is also called underwriting.
The point of this step is to ensure that your application meets all the guidelines for the loan. In addition to this, underwriters ensure that all of your credentials meet the lender’s internal guidelines, also called overlays.
The process of underwriting varies from one client to the next. In some cases, it may only take 24 hours for a full, in-depth review. In other cases, underwriting could take up to 3 days.
It also depends on the type of housing marketing you’re buying/selling in. If the buyer’s market is hot, the underwriting process may take a little longer than usual.
6. Conditional Approval by an Underwriter
During this step, an underwriter receives the full review of your application and it undergoes a process of conditional approval.
Basically, an underwriter chooses whether to approve your application, suspend it due to the need for additional information, or deny your application. If it does not meet lending guidelines, it will most likely be denied.
During this process, you can expect to receive a request for additional documents. Some of these may include letters of explanation that an underwriter will review before final sign-off.
Bear in mind that this process is yet another week to 2-week wait. There is plenty of back-and-forth during this step because the underwriter must be 100 percent satisfied with their decision for loan approval.
7. The All Clear to Close
The process is almost complete! This is essentially the final step in closing on a home where all your loan documents will be drawn up, signed, and notarized.
You can expect to review a final Closing Disclosure. This document includes your loan terms, costs, and other important details provided by your lender. It’s up to you to review it and decide if you’re happy with the terms.
You will have to wait a mandatory three days after you receive your Closing Disclosure, though. This is so that you have the time you need to review your loan terms and consult with an advisor, should you need to.
After that, you can sign your loan documents and submit them.
8. Final Closing
Once you’ve sent along your signed and sealed loan documents, your lender receives them and reviews them one last time.
This is to ensure all aspects are 100 percent complete and approved. Your lender also double-checks that all third-part reports and information are correct.
Finally, your loan will be disbursed and funded and your mortgage will be registered with your local county. This whole process should only take a day or so to complete!
Have Faith in the Process
So, how long does it take to close on a house? Shoot for an average of 7-8 weeks. We get it, it may feel like an eternity to wait to close on the deal of a lifetime and your dream home. But it’s important to trust the process and know that it’s working for you and not against you!
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