The home-closing process begins when a purchase offer is accepted, and it can drag on for longer than you might think. According to Ellie Mae's 2021 "Origination Insight Report," on average, it took about 48 days to close on a house in January 2020, and an average of 58 days to close on a house in January 2021.
The buyer's lender controls the amount of time it takes to process and close the loan unless the buyers are paying all cash. A buyer and seller can agree to close sooner, and they can put this in the purchase contract, but the lender must be able to perform its role during that time frame. If not, it doesn't matter what date is chosen because the closing can't occur if the lender isn't ready.
In this article, learn how the home closing process works, as well as ways to speed it up.
- It can take a month or two on average for a full home closing process.
- The loan approval and underwriting process can take up to a week.
- Home inspections, appraisals, and other terms of the purchase contract must be complete before escrow can begin.
- Many issues can delay closing, especially regarding the loan, so it's best to check that everything is in order before underwriting begins.
How Long Does a Home Closing Take?
The amount of time a home closing takes will depend on a few factors. There is no definitive timeline, as many of these will be happening at the same time, but here's a general idea of the steps involved and how they work together.
Buyers who have been preapproved for a loan instead of pre-qualifying are often able to close sooner. The preapproval process means an underwriter has checked certain facts and details ahead of time. If that happens, it can help to speed the closing.
No matter when in the process it occurs, the underwriter must review and fact-check the buyer's job, bank accounts, and credit report as provided by the lender. You can't close the purchase without their approval.
Underwriting can be finished in a few days, or it could take up to a week.
Federally related mortgage loans often close within 30 days. However, special first-time homebuyer programs, such as those involving help with the buyer's down payment, might take a longer period of time. These special loans may need the OK from two underwriting processes, not just one.
Inspections and Appraisals
Depending on the location and agreement between the buyer and seller, the home may need to undergo a series of quality checks prior to closing.
A home inspection won't take more than a few hours to perform, but the seller usually has a window to schedule the inspection and the home inspector is given time to prepare and submit a report, so this can add a week or two to the timeline. If any defects in the home are revealed, you'll need to tack on extra time for repairs. (Or settle for buying as-is.) Some states also require specialty inspections, such as for pests or termites.
Like the inspection, the appraisal won't take more than a few hours either, but you may have to wait a while for the appraiser's report. This is used at the discretion of the buyer and seller as a way to verify the home's value before final closing.
Meeting the Terms of the Escrow Contract
All of the terms of the purchase contract must be met before escrow can close. Think of these as agreements between the buyer and the seller to prepare the house to be handed over in a manner agreeable to both parties. Both the seller and the buyer have duties to fulfill. The seller then offers the deed, and the buyer puts down the funds.
Some common purchase contract terms include:
- Earnest money put down
- Home inspection finished or waiver signed
- Property appraised
- Buyer fulfills all loan terms, such as buying a homeowner's insurance policy
- Seller completes any other requests as agreed, such as pest inspection, roof certification, home warranty, or repairs (if any) according to the request for repairs
- Escrow terms signed
The Last Day: Closing Escrow
Once all of the steps above are complete, the final step is to close escrow. It may only take a single day, but signing paperwork is a process in and of itself. Your closing could be handled by a number of people or groups. It depends on where you're buying the home. The closing agent could be an escrow officer, a closer, the title company, or a real estate lawyer.
The final steps include:
- The final walk-through is finished, or a waiver is signed
- The deed is signed and notarized
- A promissory note is signed
- All papers are signed
- The lender has sent over the buyer's funds
- The buyer has put down the rest of the down payment and closing costs
Closing processes can vary widely, even within the same state. For example, the escrow process is different in northern California and southern California. Escrow orders are drawn and signed shortly after the offer acceptance in southern California, but they're drawn and signed just before closing in the northern counties.
There are a number of reasons a home closing might be delayed. If any step in the process is held up, the whole timeline can be affected.
Closing might be delayed if a paper is missing from the loan file, such as a preliminary title report or a seller's condition of sale. Before closing, make sure all papers are in order if you want to speed up the sale.
The biggest problems in home closing often occur after the file is sent to the underwriter. Although loan officers tend to know the guidelines, which helps smooth the loan process, they can't always predict what an underwriter will say.
It can be tough for buyers, who have packed all of their things and are waiting for movers, to wonder whether their loan will be approved. The last few days of closing can be very tense while they wait.
In some cases, large lenders cause more delays than mortgage brokers, perhaps because big banks follow their own plan of action when they approve loans.
Complying with federal guidelines such as TRID can also slow the closing process because the groups that are working together have no pre-existing relationship.
In 2015, the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) were joined in the TILA RESPA Integrated Disclosure Rule, known as "TRID" for short. This rule is intended to give buyers clear and simple closing information, but it can sometimes cause delays.
Some other common problems that may delay the closing process include:
- A low appraisal or a review that does not match the first appraisal
- More debt found on the buyer's credit report
- Mistakes noted in the buyer's credit report
- New liens or judgments filed against the buyer or seller upon the title update
- Clouds on the title
- If the buyer or seller gets married or divorced
- Missing bank statements or financial documents
- Missing insurance details
- An expired loan or program commitment
- Big changes to the fees in the loan estimate
Some of these issues may be small and take only a short time to resolve, but others have the potential to set the entire process back to square one. For instance, if you discover a title defect, a specialty title lawyer may be able to fix errors on documents or recover the chain of title in a few days. But if the title search reveals that there is an issue with ownership, the whole deal may be off the table. Similarly, if a credit check shows that the buyer has more debt than thought, underwriting may have to start from scratch; or maybe the loan will be withdrawn altogether.
In addition, the buyer's earnest money could be at risk if the loan isn't approved. If the purchase contract doesn't include a clause stating that the closing depends upon being approved for the loan, that could delay things as well. The same would apply if the home didn't appraise at a value high enough to cover the loan, and no clause about this was built into the contract.
The bottom line is that it's best if these problems are addressed before the loan goes to the underwriter.
Frequently Asked Questions (FAQs)
What is the average cost of closing on a home?
Closing costs range between 2% and 5% of the purchase price of a home on average. That means on a $250,000 home, you should expect to pay roughly $5,000 and $12,500 in closing costs.
What do you do after closing on a home?
Once you and the seller sign off on the closing documents, the home is yours. Now it's time to change your locks, deep clean, and do any painting or pre-move-in projects you want to do. Be sure you update your address, set up your utilities, and have your HVAC systems serviced to be sure they're running well.
When is the best time to close on a home?
There are advantages to closing at the beginning or end of the month, so the right time depends on which benefits matter more to you. If you close at the beginning of the month, you'll probably get a smoother, faster close because your lender may be less busy. You'll also have a longer gap between closing and your first mortgage payment. On the other hand, closing late in the month will save you hundreds of dollars in prepaid interest.