How Long Does it Take to Close on a House?
Bill Gassett, Realtor
Realtor at RE/MAX Executive Realty, Real Estate Marketing Expert
One of the questions buyers and sellers often ask me is how long it takes to close on a house.
Purchasing a house is not an overnight task. The process generally takes 30-45 days and covers critical procedures such as securing mortgage approval, getting property appraised, conducting a title search, and more.
These steps are vital to completing the home-buying process. However, don't be surprised if the journey takes an unexpected turn. Fluid factors like market trends or lender efficiency can notably swing the closing days.
Getting into the actual home-buying steps will make this more transparent.
The typical timeline for closing on a house is around 45 days, encompassing the period from offer acceptance to completion of the closing process. However, cash deals usually finalize much faster due to the absence of loan approval procedures and underwriting. Cash sales can shave off several weeks from the process.
Maximum Real Estate Exposure says from nearly forty years of selling Massachusetts real estate, the time to close on a home usually falls between 30-60 days. Sometimes a buyer or seller will have a different time frame in mind which can be negotiated.
Let's look at everything you should know about the closing process period.
Length of Time for the Closing Process
The timeline is crucial information for any potential homebuyer regarding closing on a house. You've found your dream home, made an offer, and it was accepted. The home is now under contract. The excitement is building; you're eager to know when to call it yours.
The duration from offer acceptance to closing typically lasts 30 to 60 days.
This timespan involves several critical steps that contribute to finalizing the property transaction. Understanding these steps and their respective timelines can help manage expectations and streamline the process.
Once your offer is accepted, the home will become contingent on the Multiple Listing Service. You will need to start satisfying any agreed-upon real estate contingencies.
Once all your contingencies are satisfied, the home will move to the pending stage, bringing you one step closer to homeownership.
Critical Steps in the Closing Process
Before diving into the specific timeline, let's briefly touch on the essential steps involved in the closing process:
For example, conventional purchase loans generally take about 47 days to close, while FHA purchase loans take slightly more time at 52 days.
See a comparison of FHA and Conventional loans to determine which may be better for your circumstances.
Work With a Real Estate Agent and Attorney
Understanding these different stages explains why it typically takes 30-45 days to complete a home purchase. However, please keep in mind that these timelines can vary based on individual circumstances. The efficiency of each entity involved—lenders, attorneys, appraisers, and title companies—all matter.
Potential homebuyers must stay informed on these timelines and work closely with their real estate agent and lender to promptly complete all necessary steps. I recommend finding an excellent real estate attorney nearby. They can be a significant asset in a real estate transaction.
By staying actively engaged in each stage of the closing process, buyers can help maintain its momentum. This will increase the likelihood of a successful and timely closing.
In this intricate journey of turning a house into a home, the path from mortgage application to approval is as significant as rewarding. It's a pivotal phase that demands meticulous attention and due diligence.
Mortgage Application to Approval Journey
So, you've found your dream home and must secure financing to make it yours. The process from applying for a mortgage to getting approved can initially seem daunting. However, it becomes much more manageable when broken down into steps.
Let's navigate through this vital phase together.
Pre-Approval Stage
The first step in the process is seeking mortgage pre-approval. This is where you gather your financial documents and submit them to a lender. The lender will review your credit history, income, and other financial information to determine how much they will lend you.
This step provides a clear budget as you embark on the exciting journey of hunting for your ideal home.
It’s similar to having a shopping list when you go grocery shopping. It keeps you focused and helps you avoid falling in love with a home outside your budget.
A pre-approval also shows sellers that you are serious about purchasing their property. It gives them confidence that you have taken the necessary steps to secure financing and can afford the home you want.
Underwriting and Approval
Now, let’s fast forward. You've found the perfect home, made an offer, and it's been accepted. What happens next? This is where your mortgage application goes through underwriting, a crucial stage where every detail is scrutinized.
The lender meticulously reviews your financial documents and conducts an appraisal of the property. This step ensures that both the borrower's finances and the property meet specific criteria before granting final approval.
The underwriter will carefully assess your creditworthiness, debt-to-income ratio, employment history, and other financial factors to ensure that lending money is an intelligent investment.
Simultaneously, they will evaluate the property's value to confirm that it aligns with the loan amount. It's like verifying what’s inside the recipe matches the chef's dish.
Everything should come together harmoniously.
It’s important to note that underwriting may involve additional requests for documentation or clarifications on certain aspects of your application. Patience is critical during this phase.
While it may seem tedious, remember that each request brings you closer to securing the financing needed to purchase your new house.
Each stage is vital in securing suitable financing for your dream home.
Factors Influencing the Closing Timeline
Buying a home is a significant milestone, but the process leading up to closing can be slower or faster, depending on various factors. One vital component affecting the timeline is the home appraisal.
When the appraised value differs significantly from the offered price, it can lead to negotiations. It could require a potential re-evaluation, causing delays in the closing process.
It's essential to remember that a professional performs an appraisal to determine whether you're paying a fair price for the property based on its condition and location.
You might be overpaying for the property if the appraised value is lower than the offered price. This could impact your mortgage payments, spark negotiations between you and the seller, and extend the closing timeline.
First-time sellers need to know this, among many other things.
Buyer's Financial Situation
Another substantial factor impacting the closing timeline is the buyer's financial situation. Individuals with complex financial situations or irregular income sources may encounter longer closing times.
Lenders must ensure buyers have stable and reliable income sources to repay their mortgages. Lenders may require more time to verify their financial stability if there are any inconsistencies or irregularities in their economic history.
For example, if a buyer is self-employed or has income from investments, it may take longer for lenders to assess their financial health.
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Title Issues
Last but not least, title issues can also significantly prolong the closing timeline. A title search can uncover problems such as liens or boundary disputes that need resolution before closing.
These title issues must be addressed before a property can be transferred to a new owner. If there are any disputes or claims on the title, they must be dealt with before the sale can proceed.
Resolving these issues can take time and potentially delay the closing process.
Understanding these factors provides insight into how potential delays in the closing process can arise. The knowledge helps homebuyers prepare for a smoother and more efficient buying experience.
Property Types and Sale Conditions
When purchasing a property, the type of dwelling you're interested in can significantly influence the closing timeline. Single-family homes, condominiums, and multi-family properties present unique considerations that can affect the speed at which a purchase is finalized.
For example, single-family homes tend to have a slightly longer average closing timeline than condos or townhouses.
The potential reasons for this discrepancy include the additional steps involved in closing on a single-family home, such as more extensive property appraisals and more comprehensive inspections.
Conversely, with their shared ownership structures and HOA regulations, condos or townhouses may undergo a quicker closing process due to fewer exterior maintenance responsibilities. The HOA fees will cover these items.
Due to potential rental income and tax implications, multi-family properties encompassing duplexes, triplexes, and apartment buildings involve more intricate financial considerations. This can lead to a more complex closing process.
Short Sales Can Take Much Longer to Close
Furthermore, a property's sale conditions, such as short sales or foreclosures, can introduce added complexities that may extend the closing timeline.
According to The National Association of Realtors, short sales occur when a property is sold for less than the owner owes on their mortgage. They require lender approval, leading to additional steps in the closing process.
On the other hand, foreclosures involve properties repossessed by lenders due to previous owners' non-payment. These sales typically come with distinctive requirements and considerations. This may lengthen the time it takes to close on the property.
For instance, short sales and foreclosures often require extensive financial documentation and review, involving more negotiation processes between multiple parties. This can lead to delays in finalizing the sale compared to traditional home purchases.
Understanding how these different property types and sale conditions can impact home-buying is crucial for setting realistic expectations for the closing timeline. Prospective buyers should consider these variables when making their purchasing decisions.
Moving forward into the intricacies of the home buying process, let's now explore the various requirements set forth by lenders to ensure a successful acquisition.
Understanding Lender's Requirements
Getting a mortgage is often an integral part of buying a house. This means borrowing money from a bank or other financial institution to purchase the property.
Before agreeing to lend you this substantial amount of money, lenders have specific requirements that you must meet to ensure that you can repay the loan.
Credit Scores
One of the most critical factors lenders consider is your credit score. This three-digit number gives them an idea of your ability to manage your finances and handle debts. A good credit score increases your chances of getting mortgage approval and helps you secure lower interest rates.
Debt-to-Income Ratio (DTI)
Lenders also calculate your debt-to-income ratio (DTI). This compares how much money you owe each month to how much you make. They use this figure to ensure you earn enough to comfortably cover your monthly mortgage payments on top of your other debts.
Down Payment Amounts
Another critical requirement is the down payment amount. This is the initial payment made when purchasing a property. The amount needed can vary based on the type of loan you're applying for and can range from 3% up to at least 5%.
Employment Verification and Income Stability
Financial institutions also verify your employment history and income stability to ensure that you have a steady and reliable source of income to make mortgage payments.
For self-employed individuals, lenders may require two years of tax returns to prove income stability.
Cash Reserves
Lenders might require cash reserves in addition to your down payment. This ensures borrowers have enough funds to cover several months' mortgage payments in case of emergencies.
Meeting these lender’s requirements is essential for obtaining a mortgage and proceeding with the home-buying process. Understanding and meeting these requirements will better prepare you for homeownership.
Having established the fundamental prerequisites set by lenders, it's now crucial to estimate the timeline for finalizing the purchase through a deeper inspection of the closing process.
Benefits for Buyers: Predicting Closing Time
Knowing how long it takes to close can provide several advantages when buying a home. The first and most significant benefit is the ability to plan your move-in date accurately.
Understanding the average closing time gives you the foresight to align your current lease termination or moving arrangements with the closing date. It eliminates any last-minute scrambling or costly temporary housing and makes the transition into your new home smooth and stress-free.
Moreover, knowing the factors that impact the closing process enables you to anticipate and address potential hiccups in advance. For example, if you know that home appraisals often cause delays, you can ensure that this step is initiated early in your home-buying journey.
You can significantly expedite the closing timeline by proactively mitigating possible delays.
Understanding the Average Closing Time
It's important to note that while averages provide a helpful reference point, individual circumstances can vary widely. Factors such as the specific type of mortgage, local real estate regulations, and even the property type can all influence the closing process.
For example, properties with FHA financing tend to have a longer average closing time than those with conventional financing.
To navigate this process effectively, buyers should evaluate their unique situation and work closely with their real estate agent and lender to understand how these factors may impact their timeline.
By staying informed about the length of your closing period and identifying and addressing potential issues preemptively, you can play an active role in making the path to officially owning your new home smoother and quicker.
With this knowledge, buyers have the tools to navigate the closing process confidently. If I can answer any questions, please don't hesitate to contact me.