How Long Does it Take to Buy a Home?

In this article

1. Key Takeaways
2. Due Diligence Period and Contingencies: Protecting everyone’s investment takes time.
3. The Financing Contingency: Getting the money in order.
4. Inspection Contingency: Ensuring Everything is “Copacetic”
5. The importance of a thorough home inspection
6. Your lenders want the house to work, too
7. Appraisal and Value: The Potential Deal Breakers
8. FHA Loan appraisal
9. The Pre-Approval Advantage: Saving Time and Securing Financing
10. Get a Head Start With an Upfront Approval Guarantee

For almost every first time home buyer with common mortgage types (like the FHA loan), the purchase process lasts a month from the time the offer is accepted until the keys are exchanged. 

Shopping for the right house can add at least another month to the process, and in a crowded market, you may need to make two or three offers before one is accepted.

The National Association of Realtors reported that buyers usually made two unsuccessful offers before a third successful attempt. But that’s not the case for everyone. One in four buyers was able to close successfully on their first offer. 

Borrowers pursuing more complicated loans than a Conventional, USDA, or FHA loan may also experience a longer shopping process.

The majority of the 30 days is considered the due diligence period in which the transaction must pass three contingencies:

• Financing 
• Inspection 
• Appraisal 

On the other hand, prepared borrowers can shave 10-15 days off of their purchase time, and preparedness can even lead to a more competitive offer that saves time in shopping.

What does preparedness look like? Have your paperwork in order, budget ahead of time, and get a pre-approval (or even better, an Upfront Approval Guarantee).

Finally, a great lender can help you avoid common pitfalls and formulate a competitive offer that gets accepted the first time. 

First, let’s talk about the due diligence period and then look at strategies for saving time. 

Key Takeaways

• Home buying typically takes 30 days post-offer acceptance; shopping can add a month.
• Multiple offers may be needed; about 25% of buyers close successfully on their first offer.
• The 30-day due diligence involves financing, inspection, and appraisal contingencies with an earnest money deposit.
• Pre-approvals don’t guarantee final financing.
•  Inspections ensure habitability and may lead to repair requests.
• Appraisals confirm home value.
• Being prepared can shorten the process by 10-15 days.
• An Upfront Approval Guarantee secures financing for 120 days and can make your offer more competitive.

Due Diligence Period and Contingencies: Protecting everyone’s investment takes time.

When a seller accepts an offer on their home, the house is taken off the market, and they enter into a contract that begins the due diligence period. Along with the contract, the seller hands over earnest money (1% of the purchase price) as a deposit on the contract. 

The typical contract for common mortgages like the Convention or FHA loans amounts to the following: 

We agree to purchase this property for $____ if it passes an inspection and appraisal. The buyer has ____ days to secure finance and complete the inspection and appraisal. 

The due diligence period is almost entirely made of red tape, but that red tape is in place to reduce risk for the buyer, the seller, and the lender. 

If the house is sold, the earnest money deposit goes toward the purchase. The buyer can back out and retain the earnest money if the transaction doesn’t pass contingencies.

If the buyer fails to meet deadlines or the transaction falls through due to bad-faith efforts from the buyer, the buyer forfeits the earnest money to the seller as compensation for lost time and money while their home was off the market. 

As outlined above, the due diligence period involves the financing, inspection, and appraisal contingencies, though some situations allow the contingencies to be waived. 

The Financing Contingency: Getting the money in order.

For many homebuyers, the first step in shopping for a new home is a pre-approval. In this step, a bank or other lender will suggest possible mortgages, like a VA, USA, or FHA loan, and then review your financial records to see how much money you qualify to borrow.

It is critical to understand this does NOT guarantee mortgage financing. For pre-approvals, lenders do not investigate finances as closely or underwrite a loan. They simply make an estimate based on cursory application data. 

So once an offer is accepted, the potential buyer must return to their lender to finalize the loan.

Then, the lender will examine your finances and credit to ensure you can afford the loan before approving it. While a pre-approval doesn’t guarantee a mortgage, it can speed up the approval process after accepting the offer. 

Some lenders have access to the Upfront Approval Guarantee, which guarantees the loan amount for 120 days before an offer is accepted. This allows the buyer to waive the financing contingency.

Inspection Contingency: Ensuring Everything is “Copacetic”

Once financing is approved, the seller is confident the buyer can afford the home. Now, the buyer and the lender will make sure their end of the transaction is met. 

The importance of a thorough home inspection

The inspection process will take place quickly, just as the financing is approved, if not before. The inspector will thoroughly inspect the home in the first week after the contract is signed. 

At the most basic level, the inspector ensures the buyer and lender that the home is habitable. The bathroom, electricity, and water all work, and the roof keeps the rain out. They also ensure everything in the home meets local building codes.

Good inspectors will give the buyer a list of non-critical items they could fix, potential future repairs, and any weaknesses they may encounter.

Before the inspection contingency is met, buyers often recommend the seller make repairs, discount the sale price, or cover closing costs instead of making repairs.

Your lenders want the house to work, too

An uninhabitable home is deemed functionally obsolete and will not qualify for a mortgage. 

Lenders need the home to be habitable as much as the buyers because the home will be used as collateral for the loan (more on that in the appraisal section below). 

Appraisal and Value: The Potential Deal Breakers

In a mortgage, the house you’re purchasing is used as collateral to secure the loan. Collateral is something of value that the bank can take if you don’t pay your bills.

The appraisal contingency protects the lender because they want to ensure the house is worth what you pay. 

At the same time, the appraisal contingency protects the buyer because an overinflated purchase price could harm the buyer’s financial future. If a house isn’t worth what a buyer pays, they may be unable to sell it for enough money to pay off the loan and, in theory, be stuck in the home until the loan is paid. 

If the home’s value is misrepresented, the buyer or lender can withdraw from the deal without penalty. 

Each contingency is simply a way to mitigate risk, so there are instances where they can be waived. For example, if a loan is very low risk and the property is in great shape, a buyer may waive this contingency. 

Waiving the contingency can speed up the purchase process and increase the offer’s attractiveness, but it also considerably increases risk. 

FHA Loan appraisal

Some loans, like the FHA loan, require buyers to complete a specific appraisal process with an approved appraiser. Because the government-backed FHA loan is so lenient in its qualifications and affordability, the government must enact stricter inspection rules to reduce its risk. 

The Pre-Approval Advantage: Saving Time and Securing Financing

Buyers with pre-approval usually have an easier time getting their mortgage application approved, but it can take more than a week. 

Preparing the financial paperwork ahead of time can help lenders speed the process, but underwriting ultimately takes time. 

Some lenders have access to Upfront Approval Guarantee, which guarantees financing for up to 120 days, even before you submit an offer on a house. 

Having a loan fully approved before the offer can shave ten days off of the purchase process, leading to a smoother sale for you and a speedier payday for the seller. 

However, the most significant benefit of an Upfront Approval Guarantee is your ability to waive the financing contingency.

When one offer is tied to a pre-approval financing contingency, and the other offer is guaranteed, the seller usually chooses the guaranteed route.

Get a Head Start With an Upfront Approval Guarantee

With an Upfront Approval Guarantee, you can speed up the purchase process or take your time shopping with the 120-day offer window.

See if you qualify for an Upfront Approval Guarantee from the Moreira team.