How long does it take to close on a house? Nearly 5.12 million houses get sold every year. Buying a home is an exciting process.
As the buyer, you get to scour listings, schedule showings, and make all sorts of cute lists of home features. You get to search for the perfect place and make it all your own.
Then there is the seller. They have slightly less fun. They must reduce, clean, and declutter their home to make it as attractive as possible. They must also get their home ready for an open house.
The selling process runs into some delays. Maybe your closing date is coming up soon, but you recently started talking to another potential home buyer.
Now you must wait for that potential buyer to determine whether they are going to write a contract or not. Read on to find out the answer to that question and more.
How Long Does It Take To Close on a House?
The home-closing process starts when you accept a purchase offer. However, this can drag on for a lot longer than you think. On average, it takes approximately 48 days to close on a home or a little longer.
The main thing to remember is that the buyer’s lender controls how long does it take for a house to close. Unless your buyer is paying cash, you can expect the process to drag out while they secure funding for the property.
Although buyers and sellers can agree with each other to close sooner, this needs to get included in a purchase contract. However, the lender, which is the buyer’s bank, should perform its role during the stated time frame.
Otherwise, the date you and a buyer have chosen to close the sale will not matter. Until the lender does their role by processing a loan and providing funding, you will need to keep waiting to hand over the keys.
It can take a couple of months to close on a home. This is because the underwriting process and loan approval itself can take a couple of weeks or more. Then you need to deal with appraisals, home inspections, and other purchase contract terms.
This needs to get finished before escrow begins. Then you need to deal with other delays as well, especially regarding the buyer’s loan. It is always best to check that everything is going smoothly before the underwriting process begins.
It is difficult to have a definitive timeline when it comes to closing on a home. If you are wondering how long does it take a house to close, it is always best to start the loans process as early as possible.
Preapproval and Underwriting Process
A buyer who has gotten preapproved for a loan can make the home closing process a lot faster and smoother. This should get done instead of pre-qualifying because anything can go wrong while securing funding.
The pre-approval process means that the buyer’s underwriter will have seen all the details and facts ahead of time. This will help them approve the loan sooner, and you can easily sell your house.
Otherwise, the underwriter will need to review and fact-check everything about a buyer’s life. They will need to go over the buyer’s bank accounts, credit report, and job details before signing off on the loan.
The buyer cannot close the purchase without a loan approval. Although the underwriting process can be completed within a few days, you can expect some delays for up to a week or two.
This depends on the buyer’s circumstances. If they suddenly lose their job or get a demotion, it can affect their chances of securing the loan before the closing sale date.
It is important to note that federally related mortgage loans are often closed within a month. Then you also have special first-time homebuyer programs. These involve helping buyers make down payments.
The downside is that these special loans may need to get signed off from two underwriting processes instead of one. And this can lead to a lot of unexpected delays, especially if the lender needs to review more documents.
Appraisals and Inspections
Depending on the agreement between a buyer and seller and the location, there may need to be a lot of quality checks on the property before closing on a home.
A home inspection should not take more than a couple of hours to perform. However, the seller can have a window to schedule the inspection, and the home inspector gets given time to prepare and submit their report.
This can add a few more weeks to your home selling timeline. During this time, if any defects get revealed during the inspection, you will need to add extra time for some repairs. This is important unless the buyer is willing to buy as-is.
Some states will also require specialty inspections. This is essential to rule out termites and other pest problems. The appraisal should not take more than a few hours as well.
However, you may need to wait for a while until you receive the appraiser’s report. This depends on the service you use.
The good thing is that it gets used at the discretion of the buyer and seller to verify the home’s value before closing on the final sale. Therefore, giving yourself enough time for a proper appraisal is essential to avoid issues down the line.
All the purchase contract terms must be met before closing your escrow. Considering these terms as agreements between the seller and buyer is essential.
This way, the house can be prepared well to be handed over in a manner that is agreeable to both parties. The seller and buyer will both have tasks to fulfill. For instance, the seller then needs to offer a deed while the buyer puts down the funds for sale.
Some other contract terms can include a home inspection with a signed waiver, a property appraisal, and if the buyer needs to look into the homeowner’s insurance policy. The seller should also complete any other requests that would come under this section.
For instance, a seller should be able to organize and provide roof certification, pest inspection reports, a home warranty, repairs, and so much more.
These escrow terms must be dealt with and signed in a timely manner if you want to succeed in closing on a home process.
After completing all the abovementioned steps related to the terms of the escrow, the final step is closing it. This can only take a day or two, depending on how busy the seller or buyer is.
However, signing the paperwork is a different process altogether. The closing can also get handled by groups or a number of people.
Your closing agent can also be an escrow officer, a real estate lawyer, a closer, or a title company. Then you need to go over the final steps of closing escrow. This should be a final walk-through when the waiver gets signed.
The deed will then need to get notarized and signed along with a promissory note. When all the papers are signed, the lender will need to send the buyer the funds they need to purchase the property.
The buyer will also have to put down the rest of the payment and pay for any closing costs that they are responsible for. Remember that closing processes can vary widely, even if you are in the same state.
For instance, southern California counties have escrow orders drawn and signed after an offer is accepted, while the northern counties sign it right before closing.
Now that you know the process of closing on a house and what is required, you should be careful of home-closing delays that can wreck your entire timeline.
For example, closing on a house can be delayed if a buyer has paperwork missing from their loan file. This could be a preliminary title report or the condition of sale report.
Before closing on a house, you need to ensure that all your papers are in order to speed up the sale. Otherwise, the buyer’s lender can take all the time in the world, and you will be stuck waiting longer to get the money from the sale.
Loan issues are the biggest problems when it comes to closing on a home. This can occur immediately after the file is sent to the loan underwriter.
Even though loan officers know all the guidelines and accept several loans daily to smoothen the process, they can never predict what an underwriter will decide.
This becomes really tough for buyers. Imagine packing up all your things while you are waiting for movers, but you do not know if your loan will be approved or not.
The last few days of closing on a house can be the most nerve-wracking because the buyer has no choice but to sit tight and wait to hear back from their lender.
In many cases, large lenders cause more delays than smaller mortgage brokers. This is because large banks follow their own plan of action regarding how they approve or deny loans.
It is challenging to know how fast things will go. The best thing a buyer can do is get all the paperwork ready and ensure that their file is complete for the loan application to go through.
If they have a good credit score and financial standing, the underwriter should have no problem approving the loan quicker.
Compliance with federal guidelines like TRID (TILA RESPA Integrated Disclosure Rule) can also slow the closing process. This is because the groups that work together have no pre-existing relationship.
There are also a few other common problems that can delay the closing of a home process. For instance, you may need to deal with a low appraisal or a review that does not match your first appraisal.
Then, some more debt may get found on the buyer’s credit. There can also be some mistakes in their credit report that they did not know about.
You should also ensure that no judgments or new liens get filed against you or the buyer upon your title update.
If the buyer or seller gets married or divorced, it can also cause some delays. Always look out for missing bank statements or financial documents.
Remember that any missing insurance details or paperwork can significantly delay the loan process. Finally, there can also be some big changes to the fees related to the loan estimate.
Although some of these problems may be small and will only take a little time to resolve, others have the potential to set everything back to the beginning.
For example, if there is a title defect, a specialty lawyer needs to be hired to help fix the errors on the documents. Without them, it will be challenging to recover the chain of title within a few days.
However, if the title search shows that there is a problem with ownership, then the entire deal may come off the table because the buyer will not trust the sale to go through.
Alternatively, if a buyer’s credit check shows that they have more debt than they declared, their underwriter will need to start the whole loan process from the beginning. They may also withdraw or reject the application altogether unless everything is in order.
Why Do Pending Sales Go Bad?
While shopping for or selling a new home, you may wonder what happens if a pending house sale goes back on the market. You may be wondering why the sale did not close and if there is something wrong with the property.
It is always common to see a pending sale sign pop up after a few months in a buyer’s market. Days on the market are always longer if there are fewer buyers than sellers.
However, it is typical to see the pending sign come down again. This can happen due to many reasons, like buyer or seller’s remorse.
Lenders can also cancel a mortgage if the buyer makes too many large purchases on credit while reducing their available funds during closing.
A pending sale can also fail if a lien is discovered against a property during the title search. This is essential and can prevent a seller from selling the property.
Buyers can also, at times, decide at the last minute that they do not want your home.
They may see another one that is priced better or has more bedrooms they want. Then they will try to back out of the transaction as much as possible. Low appraisals can also lower the appeal of a pending home sale.
Mortgage Loans Falling Through
A buyer who is not clever enough may not realize that increasing their debt load while waiting for their mortgage loan to close is a big mistake. They may finance a large purchase like a new car or a boat or take out loans for new furniture.
This will lead to a higher debt-to-income ratio that will make the buyer ineligible for the mortgage loan they are waiting to be approved for.
Then the pending sale will return to active, especially if the loan gets rejected because of a buyer’s impulsive financing. Many buyers may also not know enough about judgments and liens filed against them.
This can significantly affect a person’s creditworthiness, so the buyer’s loan can quickly be denied before you can close on the house.
It is always important to remember not to make any financial commitments or arrangements that differ from those that are mentioned in the initial loan application.
Buyers should always wait until after their loan is approved to buy that new family car they want so badly.
At the last minute, it can also be discovered that the seller cannot legally transfer the property to a buyer. This can only be done if you satisfy liens against the property ahead of time.
It needs to be done before closing. However, a seller may not be willing to do this. If their lien is astronomical, they may not have enough money to establish a new home if it is getting bought from the sale proceeds.
Liens can be used for many reasons, like unpaid property taxes, unpaid child support, or federal tax debts.
There may also be another party on the property deed, like an ex-partner who does not want to sign off on the title. Until the encumbrance or lien is removed, you cannot have a sale go through.
If there are no liens or legal problems, a person can simply become cold feet at the last minute. Although standard contracts usually give people a few weeks to conduct inspections and take care of all the details, a buyer can request to cancel a contract at any time.
If they have acted in good faith, they can get their earnest money deposit back after cancellation. However, this may not be possible if it is not done within the grace period.
Otherwise, they may need to forfeit the deposit depending on the terms of their contract. Then a property can always go back on the market for sale because the buyer got scared of the deal and ran for the hills.
A buyer who does not work with a real estate agent may also be overwhelmed by the entire process. They may feel more fearful and anxious without the services of experts who deal with the process.
A real estate agent should immediately notice signs of cold feet to help provide counseling so that the buyer does not repeat mistakes like this.
Many properties look the same, especially if a buyer has untrained eyes. When you walk into a home, it is normal to see all the walls, floors, and roofs. However, it would be challenging to spot every little crack in the wall or a spot on the ceiling fan.
Therefore, a home inspector can be hired to do these inspections. They will look for failing roofs, wet basements, malfunctioning HVAC systems, and so much more.
These are things that buyers cannot inspect without professional help. Therefore, buyers tend to panic when home inspectors point out problems. Even though all homes have issues, some are more significant than others.
Then buyers may demand that sellers fix pre-existing conditions like broken appliances. Buyers can also ask sellers for a credit form.
This acts as compensation for any defects. Then the pending sale may get canceled, and the home will go back on the market if a seller refuses to compensate the buyer.
Average Cost of Closing a Home
The costs for closing on a house can range anywhere between 2% and 5% of the price of a home. This means that if you buy a $500,000 property, you can expect the closing costs to be approximately between $10,000 and $25,000.
The way this is paid can be negotiated between a buyer and seller, depending on the contract. Selling a house can be delayed if these costs are not paid before the closing date.
After Closing on a House?
After the seller and buyer sign off on the closing paperwork, the property gets handed over to the buyer.
This is when a buyer will rush to deep clean, paint, change locks, or do other projects before moving in. They will also set up utilities and have the HVAC systems serviced.
After closing on a sale, it is a seller’s responsibility to move out by the date discussed with the buyer so that they can get all this work done. Any delays should get discussed before signing off on the final paperwork.
Closing on a Home Today
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