Last Updated on October 10, 2022 by Luke Feldbrugge
You’ve secured a loan and found the home of your dreams. Now it’s time to get ready for the next edge-of-your-seat moment in the home buying process: closing. The big question is: How long does it take to close on a house?
Closing on a mortgage can be straightforward, but it may also bring along some curveballs that may be anxiety-inducing. Like any part of the home-buying process, being prepared and knowing what to expect can help keep surprises at bay. There are many factors that impact how long it takes to close on a mortgage.
One thing you need to consider upfront is the cost of closing on a home, and how long it takes to close on a house once these costs are met and paid. These fees, paid to third parties to help facilitate the sale of a home, typically total 2% to 7% of the home’s purchase price. CoreLogic’s ClosingCorp, a leading provider of residential real estate closing cost data and technology for the mortgage and real estate services industries, recently published a report that showed the average mortgage closing costs for a single-family property were $6,905 including transfer taxes and $3,860 excluding transfer taxes, in 2021.
Buyers need to be prepared with how they plan to pay for these additional costs, and they should also be aware that several mortgage products can help with closing costs. VA loans, for example, have a limit on closing costs, and the seller may cover closing costs. Other mortgage products can help cover upfront costs like down payments and that money saved can help cover the costs on the back end of the mortgage process. The different types of mortgage products being used can all impact how long it takes to close on a house, but generally not by more than a few days.
So once every condition is paid for, how long does it take to close on a house? Buyers should also have a realistic timeframe for how long it will take to close. Home lending experts say that the home settlement process can typically take anywhere from 30 to 45 days for homes purchased with conventional mortgage products. Some mortgages, like VA loans, may take a tad longer since this product requires more paperwork. On the other hand, if you are a cash buyer, the process happens quicker since less paperwork is involved.
And how long will it take to close on the appraisal? The appraisal is paid for by the homebuyer and it’s used by the lender to see if the house is worth as much or more than the home loan being applied for. Most homebuyers should know that it can take a few days, or sometimes longer, to get the appraisal completed. While some technology exists to get this done quickly, not all lenders use this method; some prefer sending a flesh and blood appraiser to the house to get their value assessment and that takes a little longer.
Another aspect of closing that buyers should consider is how they want to do the closing: either digitally or in-person, though both should not take more than a few days to prepare the necessary documents for signing. Since the pandemic, buyers have increasingly demanded digital mortgages and online closings. This option can enable applicants to sign most documents electronically and meet in person to sign the remaining documents that may require the presence of a notary or attorney. Regulations can still prohibit the full settlement process from being handled electronically, so your lender will likely have hybrid options available if they have a digital process.
Once you reach your closing appointment, you are at the finish line and you become “clear to close,” as the mortgage lenders call it. So how long does it take on closing day? This process is quick, by comparison, and should not take longer than a day. This is where you sign documents and officially transfer the property into your name. Make sure you bring your closing disclosure, proof of homeowners insurance, some form of identification, and cash to close unless you’re doing a dry closing.
Here are the seven steps leading up to the closing date:
- Purchase agreement acceptance. The closing process of a house officially begins when the seller accepts, signs and returns the signed purchase offer (agreement). This agreement lists any contingencies regarding the offer and the agreed closing date. Any “good faith” or earnest money provided by the buyer must be put into escrow by the seller. Once the mortgage paperwork is signed, the earnest money is released from escrow and may be used by the buyer, who typically applies it to their down payment or closing costs.
- The buyer arranges a home inspection. The home buyer schedules a third-party conducted home inspection to look for any faults with the home that is being purchased. Buyers should attend the inspection if possible. The home inspection is an essential part of closing on a house. There is a cost to it, but it helps protect you from any unforeseen problems.
- Loan origination process starts. At this point, a buyer must show proof of income and assets, including pay stubs, W-2s, tax returns, bank statements and investment information. The buyer will need to fill out a mortgage application, review the loan estimate provided by the lender and let the lender know they intend to proceed with the transaction.
- Lender home appraisal. Part of the review process requires the buyer’s lender to order a home appraisal to make sure the home is worth the amount needed to support mortgage financing. If the home appraisal value comes back less than expected, your mortgage specialist may reduce the amount they’re willing to lend you. They could also decide not to approve the mortgage loan altogether. The loan cannot exceed a certain percentage of the home’s appraised value. Typically the home buyer pays for the home appraisal.
- Homeowner insurance and title verification. Your title company will review the public records of the home’s title for any liens, easements, or other agreements. You’ll also need proof of homeowners insurance; some lenders may require title insurance. There is a cost to this process, and it may be worked into your closing costs.
- Loan Approval. Once the underwriting process is complete, you’ll be notified that your loan has been approved. Buyers need to remember that loan closing isn’t done until the lender has reviewed the file to make sure nothing has changed since it went through underwriting. So the buyer should avoid applying for any other types of loans or credit leading up to their closing date.
- Closing disclosures. When everything is in order, your title or escrow specialist (or attorney) will send you a notice of your closing time, date and location where the meeting will take place. This will be sent to all parties, and the notice will also let you know what kind of documentation to bring to your closing. The lender will also provide a Closing Disclosure. This document outlines all the closing costs and obligations you’ll be agreeing to at closing. This is similar to your original loan estimate but will often contain more detailed information. Go over this document with your real estate specialist before closing on a house to ensure everything is accurate and you understand all aspects of the disclosure.
Closing costs typically equal about 2 to 5 percent of the purchase price. These costs include fees for things like title insurance and appraisal. Buyers can pay closing costs with a cashier’s check or a certified check. Or in some cases, buyers will need to send the payment through a wire transfer.
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