How Long Does It Take to Close on a House?
The home closing process begins when a purchase offer is accepted, and it can drag on longer than you might think. Realtor.com has reported that, on average, it took about 50 days to close on a house in 2019. The buyer's lender determines the amount of time required to process and close the loan unless the buyers are paying all cash. The lender plays an important role that can't be overlooked.
A buyer and seller can agree to an earlier closing date in the purchase contract, but the lender must be able to perform during that time window or it means nothing. It doesn't matter what date is selected because the closing won't occur if the lender isn't ready or available.
Your transaction won't close until the lender is prepared and available to close.
The Escrow Closing Process
Any number of persons or entities might handle the closing process, depending on where you're buying. The closing agent could be an escrow officer, a closer, the title company, or a real estate lawyer.
Closing processes can vary widely even within the same state. The escrow process is different in northern California than it is in southern California. Escrow instructions are drawn and shortly after offer acceptance in southern California, but they're drawn and signed just before closing in northern counties.
All the terms of the purchase contract must be met before escrow can close. The seller then deposits the deed and the buyer deposits the funds. Some types of conditions that are often required include:
- Fully executed purchase agreement and addendums
- Deposit of earnest money deposit
- Home inspection or waiver
- Fulfillment of seller obligations such as submission of pest inspection report and/or completion, roof certification, home warranty, preliminary title policy, beneficiary demand receipt, and repairs, if any, according to the Request for Repairs
- Completion of buyer inspections, including release of contingencies, if demanded
- Buyer's final walk-through inspection or waiver of the walk-through
- Appraisal of the property by lender's appraiser
- Lender's loan approval and satisfaction of loan conditions by buyer, such as providing evidence of a homeowner insurance policy
- Seller's and buyer's signed escrow instructions
- Seller's signed and notarized deed conveying title
- Buyer's signed and notarized deed of trust and executed promissory note
- Buyer's signatures on all loan documents
- Deposit of buyer's funds from lender
- Deposit of balance of buyer's down payment and buyer's closing costs
How Long Does a Home Closing Take?
Buyers who have received loan preapproval versus loan pre-qualification are often in a position to close sooner. The preapproval process involves verification of certain information before signing the purchase contract. This moves the borrower a few steps closer to closing.
Closing can take place as quickly as underwriters can process the paperwork and review the appraisal, generally within a week or two. The underwriter must review and verify the borrower's employment, bank accounts, and credit report provided by the lender. The transaction can't close without the underwriter's approval.
Closing might be delayed if a document is missing from the file such as a preliminary title report or a seller's condition of sale.
Underwriting can be completed in as little as a few days, but it usually takes at least a week.
Federally-related mortgage loans can often close within 30 days, but special first-time home buyer programs, particularly those involving help with the buyer's down payment, might take 35 to 50 days. These special loans typically require approval from two underwriting processes.
Home Closing Delays
The biggest problems often occur after the file is submitted to the underwriter. Loan officers are generally familiar with underwriting guidelines, but they can't always predict an underwriter's response because each underwriter is unique.
Little is worse for buyers than sitting on top of boxes containing every valuable they own, waiting for movers and not knowing if or when their loan might be approved by an underwriter. The last few days of closing can be very suspenseful.
Most delays in escrows are due to big banks being involved.
Institutional lenders seem to cause more delays than mortgage brokers. This could be because big banks follow their own procedures, or because their employees punch a clock and don't feel urgent about closings like their commissioned counterparts.
Complying with TRID guidelines can also slow the process because the entities that are working together have no pre-existing relationship.
Some other problems are common and should be addressed prior to submission to an underwriter, but sometimes the ball gets dropped:
- Low appraisal or the underwriter orders a review appraisal that does not match the first appraisal
- Additional debt found on the buyer's updated credit report
- Mistakes noted in the buyer's credit report
- New liens or judgments filed against the buyer or seller upon title update
- Clouds on the title
- Marital status change for the buyer or seller
- Required updated bank statements or financial documents
- Insurance information that's missing
- An expired loan or program commitment
- Substantial changes to the fees in the loan estimate
The buyer's earnest money deposit could be at risk if the loan isn't approved and the purchase contract doesn't include a provision that makes closing contingent upon loan approval. The same would apply if the property didn't appraise at a value sufficient to cover the loan and no contingency was built into the contract for this eventuality.