In this article
- How long Does it Take to Close?
- Closing Times of the Different Loans
- How Fast Can a Homeowner Close?
- a. Prepare for the process
- b. Prepare the needed documents
- c. Promptly responding to your lender
- d. Considering Pre-Approval
- Getting Your Loan Approved Fast
- 1. Gathering the Required Paperwork
- 2. Being Open and Honest
- 3. Considering a Mortgage Pre-approval
- Why does Closing on a House Take Long?
- 1. Opening an Escrow Account
- 2. Getting a home inspection
- 3. Performing Title Work
- 4. Finalizing the Mortgage Loan
- 5. Making a Down Payment
- 6. Paying the Closing Costs
- 7. The Final Walk-Through
- 8. Signing the Closing Documents
- What Are the Current Rates
How long Does it Take to Close?
Tips for a faster closing when buying a house. It takes about 49 days for a home loan to close, according to data from ICE Mortgage Technologies. The closing process can be even shorter if you are prepared. With the right approach and plan, you can easily do it in 30 days or even less. The pandemic has had a big impact and has increased the time. This is because there has been an increased number of people refinancing their homes, but things are going back to normal. There were low mortgage rates being offered by lenders during the pandemic, which many people took advantage of. Homeowners have been seeing shorter closing times this year. There are some things you can do to make the process even shorter. Below are some tips that are going to help you.
Closing Times of the Different Loans
Conventional loans take 48 days
VA loans take 57 days
FHA loans take 54 days
You might know this already; refinance loans usually take a shorter time to close compared to a home loan. Conventional home purchase loans take 52 days compared to 44 days it takes for a conventional refinance. The reason why it takes VA and FHA loans more days to process the loan is that there are extra steps that have to be taken.
How Fast Can a Homeowner Close?
The national closing average time is 49 days, but there are times when it is shorter. This is common when the mortgage application doesn’t have errors and all the information and documents provided are correct and available. There are some that even go through in less than a month. When you hire a good broker, some persistence, and solid documentation, you can easily close in two or three weeks.
When you pay cash for your home, you can remove the waiting time and closing periods. When you eliminate the need for a mortgage, it is going to take you a couple of weeks to close. A title search, home inspection, an escrow account, and a title deed transfer are still going to be needed despite paying cash. It is also good to make sure your home has been appraised so you can confirm the market value.
When a home purchase is mortgage-financed, it takes longer for it to close. You don’t have to wait for two months before the sale closes. There are ways of shortening the waiting period. Below are some tips to help in shaving off a couple of days of your closing period when buying a home using a mortgage.
a. Prepare for the process
When you are buying a home, you need to have proper planning. Even if you are going to buy it for cash, you can start saving early. Have a plan for saving enough money to use as a down payment before applying for the loan.
b. Prepare the needed documents
Put effort into researching the documents that lenders usually ask for when applying for a loan. When you are ready with those documents, it helps with the process. Most lenders will share this information on their sites. You can also talk to a loan officer who will help in determining the documents needed before you can start the process.
c. Promptly responding to your lender
During this process, there are times when the processing officer or lender needs clarification or more documents. You should respond to any calls, texts, and emails from the lender when you see them because it will make the process faster.
d. Considering Pre-Approval
A pre-approval is where the lender determines your creditworthiness and the amount you can get, even before you even apply for the loan. This is going to make things easier if you decide to apply for a loan in the future. This is also something to do if you want to close fast.
Getting Your Loan Approved Fast
When you respond to the requests being made by the loan officer, it can affect how fast the home sale is going to be finalized. You should make sure your communication lines are always open. You should plan ahead and respond as soon as possible. If it is possible, have soft copies of documents that the loan officer might ask for. Try to anticipate what the lender can ask for so you can save yourself time and trouble. This can have a big impact on your closing time. You can reduce the closing by:
1. Gathering the Required Paperwork
Lenders have a list of requirements that a borrower has to meet when they apply for a home loan. Try to find out the paperwork requirements needed and then compile them as soon as possible. Some of them include your federal tax returns, bank statements, W-2 statements, recent pay stubs, and other verifiable documents.
You also have to make sure you have your Social Security Number and that of everyone listed on your mortgage and a copy of your driver’s license. Your credit status is also another important thing. You have to disclose financial records like your child support and alimony payments, gift funds from family and friends, foreclosure, and other relevant financial records.
The process of gathering and verifying paperwork can take time, which makes it a good idea to have the documents ready. Make a list of documents needed, and then put them together so you can easily retrieve them when needed. You should also have a soft copy of those documents, although this is going to depend on the lender. Take some time to scan the documents then store them safely on your computer, phone, or flash drive. When everything is ready, it becomes easier to process and verify your documents, which can easily shave off days from your closing time.
2. Being Open and Honest
You shouldn’t lie on your application because it makes things worse. The lie is going to come out during the process. try being open and honest with the lender no matter how damaging the information can seem. There are benefits you can expect to get when you are open and honest;
a. Withholding important information when applying for a loan can be interpreted as loan fraud, which is going to be way worse than not getting the loan.
b. The lender is going to know it eventually. The reason why these loans take time to approve is that the lenders usually do a background check on the applications before they accept or reject the application. The approval process is thorough, which makes it easy for them to detect fraud. The mortgage approval process is going to include;
Credit checks – determining your creditors, debts, and judgments, if any
Occupancy test – The underwriter is going to do an occupancy test
Employment check – this is going to verify your income capacity and job status
Public records check – this is an important step, especially if there are any questions about the above checks.
If the underwriter notices any inconsistencies with the application, they can ask you to provide more or verify the information you have provided. They can also ask you to provide a detailed report. This can easily cost you your application. You should always keep in mind that the lender is going to find out any information you are hiding – be open and honest to avoid any problems.
3. Considering a Mortgage Pre-approval
You can make things a little easier for yourself by applying for pre-approval if you are thinking of applying for a mortgage later on. Many people don’t know that a pre-approval can help them save a lot. It can help you save effort and time because it speeds the process up by a week or even more. The good thing about pre-approvals is you also need to make sure you meet certain loan criteria. The loan officer is going to conduct the full loan application process, complete with income and asset verification. They are also going to account for the specifics of your loan’s traits before determining the final approval. Some of the traits that they are going to check include required child support payments (if any), availability of a co-signer, and personal credit score. The only thing that is going to miss from this process is the home to be purchased. The loan officer is going to reference the pre-approval later when you want to apply for the mortgage.
In most cases, they are going to use dummy information for ‘real address’ when calculating probable loan data. This can also include sample real estate tax bills, homeowners’ insurance policies, purchase prices, etc. When the pre-approval process is completed, you are going to move to underwriting the loan and not writing a contract.
Why does Closing on a House Take Long?
There are many reasons why closing on a home takes a long time. The process involves a lot of things. These include;
– Home Appraisal
– Underwriting process
– A title search for ownership history
– Home inspection
– Money coming to the escrow account before paying for the above services
Each of the above steps can take a couple of days to a few weeks to complete. There are some that can be done simultaneously but there are those that are interrelated. If there is a minor delay in one of the above processes, it can affect the rest. What happens during the closing process?
1. Opening an Escrow Account
A real estate attorney opens an escrow account because it is needed to hold and also pay out the money that is required for the closing services. This ensures that the payments are organized and made on time. You need to know that the money that is deposited in escrow is going to be used for payment for the necessary services, and the remaining is going to be used for the down payment.
2. Getting a home inspection
You can request a home inspection when you sign the contract. This process is not a must, but it is going to help in protecting you if the house is not in a good condition. The inspection uncovers issues with the house that you might not easily see. If there are severe issues with the house, it is possible to terminate the contract.
3. Performing Title Work
A closing agent or attorney hires a title company to help with the search. This is going to help in establishing the rightful owner of the house.
If there are any issues with the title, e.g., claim of lien or inheritance, the seller has to solve the issues before closing. You should also consider getting title insurance so you can be covered if issues come up after closing.
4. Finalizing the Mortgage Loan
A pre-approval is going to help you a lot as a borrower because it gives you a head-start when you are looking for financing. Underwriting is important, but it happens after signing the purchase agreement. The underwriter will crosscheck a lot from income, debts, and credit reports before your request is approved. They are also going to determine the market value of your home through a home appraisal. This is the point a person can lock their interest rate. You can see the total mortgage amount, loan costs, and interest amount over the term of the loan.
5. Making a Down Payment
In most cases, the loan amount covers a more significant percentage of the overall purchase price of your home. You need to make a down payment so it covers the remaining balance. You don’t need to have a down payment for USDA and VA loans. Some of the ways of paying your down payment include cashier checks, electronic transfers, or payments through escrow.
6. Paying the Closing Costs
When closing a home, there are other services you need to pay for. These costs include title fees, attorney’s fees, lender’s fees, and home appraisal fees. The costs can cost 2-5% of the home purchase price. If you are buying a home for $330,000, it is going to cost you between $6,600 and $16,600 to close.
The seller can share some of the costs in some instances. If you want to try that, then negotiate it in the purchase contract. Lenders can also agree to cover these costs in exchange for a high-interest rate.
7. The Final Walk-Through
This is important the day before or on the closing day. The goal behind this is to make sure everything is the way it needs to be, especially if you had asked for minor upgrades or repairs.
8. Signing the Closing Documents
The final step is to sign the loan documents on closing day. If this is your first time, then be ready to sign a stack of papers. The final paperwork is going to place the lender’s lien on the property. You are going to have to pay for a promissory note saying that you will be paying the agreed loan amount and a deed of trust covering a foreclosure or failed loan payments.
What Are the Current Rates
The mortgage rates keep changing, and this was seen during the pandemic. The mortgage rates have gone higher from the lows seen during the pandemic. They go up to cool the inflation. Locking a mortgage rate is a good way of protecting yourself from increasing rates. Faster closing can also save you from inflation that can happen in a matter of weeks.