When you buy a new house, it might not take long to negotiate and agree on a purchase price, but there's a lot more that needs to happen in the homebuying process before the property legally becomes yours. That doesn't happen until closing -- the date when you sign all of the paperwork and officially become the owner of the home.
The closing process is not a quick one, especially if you're like most home buyers and plan to use a mortgage to purchase your property. In most cases, closing on a house in a month or less would be considered very fast. Here's a quick guide to the timeframe you should expect when closing on a house, the steps that need to happen before you can go from being a prospective home buyer to an official owner, and some ways you might be able to avoid delays and speed up the process.
The short answer
There's no single answer when it comes to how long it takes to close on a house. Closings can take as little as a week or as long as 60 days (or sometimes even longer) depending on the circumstances.
As of August 2020, it takes an average of 45 days to close on a home purchase, according to the Ellie Mae Origination Insight Report. Most closings are scheduled for a period of 15, 30, 45, or 60 days after a signed purchase contract, although other time frames are certainly possible.
Steps to close on a house
Why does it take so long to close on a house? The answer is that there are a bunch of things that need to happen in the homebuying process before real estate can officially change hands. Here's a list of the most common steps (in rough chronological order) that make up the closing timeline:
Signed purchase contract - This is the first thing that needs to happen to get the ball rolling. After negotiating a purchase price with a seller, the closing process can begin. Your purchase contract will also contain the expected closing date.
Earnest deposit - Typically, a buyer will submit a small deposit along with an offer to purchase a home. This is known as an earnest deposit, or earnest money, and will be held in an escrow account.
Home inspection/Due diligence period - Purchase contracts typically provide for a time period during which the buyer can conduct whatever inspections they see fit and can back out of the contract or ask the seller to make repairs. Depending on the situation, this is typically from three to 10 business days in length, unless the buyer waives the right to inspect. If repairs are needed, it can add time to the closing process as well.
Appraisal - This is a step required by lenders but is optional if you're paying cash (but it's still a good idea). An appraisal is essentially a professional determination of the home's value. Lenders require it to make sure they aren't loaning more money than the property is worth, and it can also help prevent you from overpaying on a cash sale. Typically, this takes place within the first few days after a signed and executed purchase agreement is in place.
Financing - Unless you're buying your new home in cash, you'll need to get a mortgage. And this process can take a while. You'll have to extensively document your income, employment situation, assets, and more to your mortgage lender. Your loan officer will conduct a thorough review of your qualifications and the property and will then send your file to be reviewed by underwriters. In all, the mortgage process can take a month or longer from application to closing. You can cut some time off of this by filling out a mortgage application and getting pre-approved before you start to shop and by responding to documentation requests immediately, but this is still a lengthy part of the real estate closing process.
Home sale contingencies - Is the buyer moving from an existing home? Many purchase contracts have a contingency that says the buyer is only obligated to follow through with the purchase if their existing home sells. If it takes longer than expected for the buyer to sell their current home, it can lead to significant closing delays.
Hazard insurance - This is a requirement if you're obtaining financing but is still generally a must-do even if you're buying a house in cash. You want to make sure you (and your lender) are protected in case of fires, floods, storms, theft, vandalism, and other potentially damaging situations. And a homeowners or landlord insurance policy will protect you from liability if another person is injured or their property is damaged while at your house.
Title search/Title insurance - The short explanation of title search and insurance: It ensures that once you buy a property, nobody else can try to claim it later. For example, if someone shows up years later and says their family has owned the land your property is on for 100 years, the title search can prove them wrong. And if it turns out that there are title issues, title insurance will protect you and your lender against financial loss. A title company will complete the search and insurance process, but it takes a week or so.
Final walk-through - On the day of closing, or the day before, you'll typically have the opportunity to walk through the property to verify that you accept it in its current condition. You don't have to do a walk-through, but it can often reveal some surprises, especially if it's the first time you're seeing the property without the previous owner's furniture inside.
Transfer of funds - Before the property can close, all of the buyer's funds to purchase the property and cover the closing costs need to be in place. The closing attorney needs to receive money from the buyer's mortgage company, the buyer's down payment, any earnest deposit that has been held in escrow, and any other necessary sources of funding.
Closing - This is where you sit down with a real estate attorney or closing agent and your real estate agent, receive your closing disclosure and settlement statement, and sign a large stack of paperwork, after which point the house legally becomes yours. Plan to spend at least an hour or so doing this -- my last closing involved more than 100 pages of closing documents to sign.
There are other factors that could add time to a closing as well. For example, the COVID-19 pandemic not only made in-person closings difficult, but the record-low interest rate environment created a backlog of business for many lenders, home inspectors, and attorneys, which led to widespread closing delays.
Of the items on the list, financing and appraisals are perhaps the two most likely causes for slowing down a closing. Mortgage delays are quite common, and any problems with a property's appraised value can lead to financing issues or another round of time-consuming negotiations. It's also worth noting that it's quite common for real estate contracts to be modified within the closing time frame to accommodate a closing delay.
Make sure you give yourself enough time to close
As a final thought, real estate closings can be hectic and stressful enough without trying to accommodate an unrealistic timetable. If your lender says they need "at least 30 days" to close on a loan, don't set the closing date for exactly 30 days from when you have a signed contract. A 45-day close would be a much more realistic time frame.
The bottom line is that a real estate transaction is one of the most complex types of property transfers there is, especially when there's financing involved. It isn't a simple matter of one party giving the other money and the property changing hands. So, be sure you allow enough time for all of the pieces of the puzzle to come together.
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