You found your dream house and the seller accepted your offer. Before moving in, there’s a long list of steps that must be completed before you close on the house and receive your new set of keys.
“Once your purchase agreement is fully executed, meaning all parties have signed, you can expect to close your loan within 30 days,” says Emily Tolbert, loan originator with Motto Mortgage Signature Plus.
After you make an offer on a house, there are several steps that must be completed before you get to the closing table. However, there are some measures you can take to help save time. “In some cases, you can close earlier if you are willing to pay for a rush appraisal or if you work with your loan originator to be fully preapproved prior to executing your real estate contract,” Tolbert adds.
By knowing what to expect and working closely with your agent and lender, you can potentially save time and minimize any frustration.
— How fast can you close on a house?
— The closing timeline.
— Negotiate the contract.
— Complete the mortgage application.
— Open an escrow account.
— Order a title search.
— Get an appraisal.
— Get a home inspection.
— Final walk-through.
— Closing.
[See: 15 Secrets to Selling Your Home Faster.]
How Fast Can You Close on a House?
There are factors that can either delay or speed up the closing timeline. “It is really all about planning and working with someone you trust and feel comfortable communicating with,” says Tolbert.
“Having your documents in order and getting preapproved before looking at homes can save you a lot of time and potential heartache. Once you are under contract, I recommend paying for a rush on the appraisal, often this additional payment can save you a week or more on closing,” she advises.
According to Tolbert, how long each step takes depends on the borrower and the loan originator. “I can obtain conditional loan approval in one day or less. As a borrower, you need to be prepared to move quickly too,” she explains.
“Get your inspections in order so you can obtain an insurance quote and avoid being defensive when an underwriter is asking you to explain something. Buying a home can be stressful but it is also very exciting and can be finished up quickly with great teamwork.”
Buying a house with cash will speed up the closing timeline, but that’s not an option for everyone. The type of loan you use can also affect the time it takes to close — for example, FHA and VA loans usually take a a bit longer than conventional loans, but only by a few more days.
The Closing Timeline
Here’s what you can expect from the closing timeline, from signing the purchase agreement to closing day.
1. Negotiate and Sign the Purchase Agreement
The first step toward closing on a house is negotiating elements of the purchase agreement before signing.
Purchase agreements typically include contingencies, which are conditions or actions that must be met for the real estate contract to be binding. Both the buyer and the seller must agree to the terms of the contract.
Here are some common contingencies you may find in a purchase agreement:
— Inspection contingency: This allows the buyer to have the home inspected within a certain time frame. The buyer can negotiate repairs or cancel the contract if problems are found with the home.
— Appraisal contingency: This allows buyers to back out of the deal if the home appraises for less than the purchase price in the contract.
— Financing contingency: If the buyer can’t secure financing within a certain amount of time, then they can cancel the contract.
— Title contingency: The title for the property must come back clean before the contract is binding.
— Home sale contingency: The offer is contingent upon the successful sale and settlement of the buyer’s current home.
While there is no set time limit for how long you or the seller have to respond to negotiations, common courtesy dictates a response within one to three days.
[Contingent vs. Pending and What It Means for Buyers]
2. Complete and Submit Your Mortgage Application
This step is between you and your mortgage lender. You’ll need to complete the mortgage application and provide documentation of your financials, including bank statements, W-2 forms, pay stubs and proof of assets. The lender will also run a credit check.
While this can take some time, having a preapproval will speed up the process.
[Read: Best Mortgage Lenders.]
3. Open an Escrow Account
An escrow account is opened, which holds earnest money or “good faith” money to show the seller that you’re serious about purchasing.
Your mortgage servicer will deposit a portion of each mortgage payment into your escrow account to cover your property taxes and insurance. Earnest money is typically deposited into the escrow account within three days of the contract going into effect.
4. Order a Title Search
Buyers will typically need to order a title search either through an attorney or title company.
During a title search, public records are examined to make sure that there are no claims, liens or other issues with the property. Any problems could prevent the seller from legally transferring ownership of the property to the buyer, while a title contingency protects the buyer against this occurrence.
The title search process can take 10 to 14 days to complete.
[Read: The Guide to Title Insurance]
5. Get an Appraisal
If you’re getting a mortgage to pay for your home, your lender will require you to get an appraisal on the property. Lenders will require an appraisal to make sure the home is worth its purchase price and can be sold to cover any losses if you default on the loan.
If you’re buying a house with cash, an appraisal is optional but it may be worth it if you’re worried about overpaying for a house.
The appraiser will visit the property and spend a few hours inspecting the interior and exterior of the home. The appraiser also compares the property to similar properties that were recently sold in the area. The time it takes from ordering an appraisal to receiving the report could take several days to a week or more.
[How Do Real Estate Commissions Work?]
6. Get a Home Inspection
Although a home inspection is optional for conventional mortgages, it’s highly recommended that you get the home inspected for potential defects.
A typical home inspection takes several hours to complete and the report could take several days to complete. The report includes any issues found on the property and you can work with the seller to have some repaired before moving forward.
If your inspector finds major issues with the home and you have an inspection contingency, you can walk away from the deal.
7. Do a Final Walk-Through of the House
Before closing, you’ll do a final walk-through of the house with your real estate agent. If you requested repairs be made after the inspection, now is the time to make sure the seller fulfilled their end of the deal.
This is also around the time you’ll receive your closing disclosure. Your lender is required by law to send you a closing disclosure at least three business days before closing.
This document gives final details about the mortgage loan and includes loan terms, your monthly mortgage payment amount and how much you will pay in closing costs and fees.
8. Close
Your closing appointment, which is given in your purchase agreement, is the finish line. This is when you sign the final paperwork, make your down payment and pay the closing costs listed in your closing disclosure.
Make sure you bring your closing disclosure, proof of homeowners insurance, some form of identification and unless you’re doing a dry closing, cash to close.
Missing your closing date could result in certain penalties and the purchase contract will expire.
“You will want to do your part to avoid this because you can potentially put your escrow deposit, also known as earnest money deposit, at risk,” notes Tolbert. “It is important to communicate throughout the process so if there is a potential slow down, the real estate agents involved can discuss an extension to your contract.”
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How Long Does It Take to Close on a House? originally appeared on usnews.com
Update 07/13/23: This story was published at an earlier date and has been updated with new information.
