How Long Does It Take to Close on a House?

The length of time it takes to close the sale of a house varies greatly based on a variety of factors, with the average time to close in April of 2017 taking 42 days, according to the “Origination Insight Report” released by Ellie Mae, a financial company that processes approximately 25 percent of mortgage applications in the United States.

Getting all of your ducks lined up in a row early in the home shopping process can help you trim considerable time off the closing process and let you move into your new home faster.

The Lender is Key

The length of a closing relies primarily on the buyer’s lender. Even if the buyer and seller agree to close the sale by a specific date and properly submit all of their paperwork, it’s the loan lender who determines when the sale can be finalized. Without a loan, a willing buyer can’t purchase a home from a willing seller.

The good news is that while lenders want to perform adequate due diligence to make sure they lend money to a reliable borrower, they also want to make the loan sooner than later to avoid the borrower backing out.

What’s Involved in a Closing?

Just because you tell a seller, “I’ll take it,” doesn’t mean the two parties have come to an agreement and the closing process begins. There are a variety of factors that affect a closing:

The Loan – A buyer who is only pre-qualified for a loan will take longer to close than one who has been pre-approved for a loan. The type of loan or loan program the buyer is using can also affect the time of the sale. For example, if the buyer is a first-time homebuyer and qualifies for a special federal loan program, the closing paperwork might take longer to go through.

The Appraisal – If the home’s appraisal is less than the selling price, this can delay the closing process.

The Inspection or Waiver – Depending on what a buyer discovers after a home inspection and what demands he makes on the seller to make improvements or other concessions, the closing can stall.

The Credit Check – If a buyer has derogatory items on her credit report, this can lead to new questions from a lender.

The Seller – A buyer is at the mercy of a seller properly submitting a variety of documents, such as a pest inspection, a transfer of warranties and other paperwork.

Other factors that must be addressed on the buyer’s side include:

  • Employment history/status verification
  • Financial status (bank statements, tax returns, W2s)
  • Payment of earnest money
  • Signed escrow instructions
  • Preliminary title report (insurance)
  • Deed of trust and promissory note
  • Deposit of funds by the lender
  • Final home walk-through and approval

Documents required on the seller’s side include:

  • Deed paperwork
  • Seller’s condition of sale
  • Signed escrow instructions

Finally, the speed of closing depends on how experienced lenders and underwriters are, and how committed they are to the process. For example, if a lender or underwriter gets busy, forgets to submit a document request, makes a paperwork error or takes a few days off, that will stall the process.

Once the buyer’s loan has been approved by the lender and both the buyer and seller have supplied all necessary documents, the two parties meet to place their signatures on the final sale and transfer documents.

 

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