You’ve finally found the house of your dreams and just signed the dotted line of your purchase agreement. First off, congrats! The closing process for your new home has officially begun.
While you can generally expect the closing process to range anywhere from a week to a few months, a unique mix of controllable and uncontrollable factors will ultimately determine where you land on the closing timeline.
Open an escrow account (0-3 days)
Once you and the home seller agree on terms and execute a contract, you enter a period known as escrow. During this time, a third party (like a mortgage lender or escrow agent) will temporarily hold money or property in an account until conditions have been met and closing officially occurs.
Technically, an escrow account isn’t required for most conventional loan types. Having one, however, allows you to avoid direct responsibility for making sure your property taxes and insurance premiums get paid on time.
Since this is a relatively standard process often bundled into the contract of sale, hammering out the details and opening an escrow account shouldn’t take more than a few days.
Conduct a home inspection (7-14 days)
A home inspection is designed to evaluate your prospective property’s condition. This inspection is carried out by a third-party professional, who examines the home and provides a comprehensive report of any potential problems, including the condition of the property’s exterior, grounds, and electrical systems.
While most inspections are done shortly after purchasing agreements are reached, report turnaround can vary according to the inspector. The home inspection process can take up to two weeks, especially if any repair requests need to be submitted.
Request a home appraisal (7-14 days)
Once a home is inspected, a home appraisal determines how much a house is worth. Like a home inspection, this process is carried out by a third-party professional. This step is particularly crucial if you are financing your home via a mortgage since most lenders require appraisals to ensure that you’re paying a fair and correct price for the house.
A home appraisal timeline includes scheduling logistics, a home visit, market research, and report findings. Thus, under normal conditions, you can expect to wait up to two weeks for a home appraisal to be completed fully.
Clear the title (7-30 days)
Public records related to the property’s title and history will need to be examined. This step confirms that the seller is indeed the property’s legal owner and therefore permitted to transfer property ownership to you. A title report brings to light a wide range of issues that may be attributed to the property, including past disputes, claims, liens, HOA, unpaid taxes, or pending lawsuits.
Typically, either a real estate attorney or a third-party company will need to be hired to conduct a title search. Depending on the complexity and history of the property, clearing the title can take anywhere between seven and thirty days.
Complete a mortgage application (30-60 days)
The mortgage underwriting process is often the most time-intensive step of the entire closing process. During this step, an underwriter will verify and confirm information about your potential new home. This is where the appraisal conducted earlier comes into play. Your finances will also be put under a microscope, such as your credit history, assets, debts, income, and total savings.
Once the underwriter is finished reviewing your mortgage application, they will usually grant one of three determinations. If the underwriter is satisfied with your status, they will issue a conditional approval. If it is found that you need to provide additional information, the underwriter may suspend your file temporarily until the issue is resolved. Finally, if it is determined that you fail to meet certain conditions, the lender may choose to deny your application outright.
Though it depends on the lender and your pre-approval status (more on this later), it can take between one and two months for an underwriter to issue a conditional approval.
Receive clearance to close (3 days)
Conditional approval means that you now have a “clear to close” and your lender will provide you with a closing disclosure. This document lists all relevant disclosure terms including:
- Loan amount and terms
- Interest rate
- Estimated monthly mortgage amount
- Cash needed to bring to closing (cash to close)
- Loan disclosures
- Closing costs
There is a mandatory waiting period of three days before you are legally permitted to sign any paperwork related to the closing disclosure of your approved loan.
Bring it home on closing day (less than a day)
If everything goes according to plan, you and possibly your agent will conduct one final walkthrough of the property to confirm that any repairs have been made, that the previous owners have vacated the premises, and that your new home is in a satisfactory condition according to your contractual agreements.
On your closing day, you’ll be tasked with signing any official closing documents, including the deed of trust (potential foreclosure previsions), the escrow disclosure (how much escrow taxes and fees you’ll be expected to pay each month), the mortgage note (specific terms of your mortgage), and the promissory notes (financial terms of your loan).
Finally, to make it official, you’ll pay any closing fees that you owe to your lender and transfer your new home’s title into your name. From start to finish, closing day activities for a buyer shouldn’t take more than a few hours.
A cash offer caveat
Unsurprisingly, home buyers often encounter an expedited closing timeline if they have the means to forgo financing and buy a home entirely with cash. All else equal, a cash offer will be quicker because you won’t have to complete a mortgage application and wait for its approval. Some cash buyers even decide to waive certain contingencies, such as house inspections, in favor of an especially fast close.
To put this cash offer timeline into perspective, Homelight.com data from February 2023 shows that a standard mortgage-funded closing process takes an average of fifty days, with other non-standard FHA and VA loans taking even longer. Conversely, for a home buyer using cash to fund their home purchase, the closing process can take as little as one week.
Six common reasons for closing delays
While it would be better and (certainly less stressful) if the closing process went off without a hitch, that’s not always the case. Sometimes a buyer may do everything right and still encounter pesky delays.
- The appraisal is lower than the sale price. A lower-than-expected appraisal can spell bad news. You’ll likely need to renegotiate with the seller in hopes of reducing the selling price. Otherwise, you’ll need to drum up enough cash to cover the difference between the home’s appraised value and the sale price to appease your lender’s worst-case fears. Your lender may also choose to request a second appraiser’s opinion, which can further delay the proceedings.
- Buyer-based financing issues. A significant portion of closing delays can be traced back to buyers experiencing holdups in the loan approval process. Credit report issues, significant credit score changes, incomplete or incorrect loan applications, and unpaid debts are just some of the many reasons why a buyer’s loan may not be approved promptly. Though it depends on the severity of the problem, a financing issue can easily push your closing process back thirty to sixty days.
- Title problems. When looking into the history of your potential house, you may uncover that there are inconsistencies related to preexisting land surveys. Perhaps improper renovations were made against the local code. Maybe there even are heirs laying claim to the property. At the very least, these problems will delay the escrow process and possibly even jeopardize the sale entirely.
- Troublesome inspection reports. If the home yields a lengthy inspection report, buyers will often request for some repairs to take place before agreeing to terms. Negotiating back and forth with the seller will burn some time, not to mention the time and resources that will be needed to complete the repairs themselves.
- Missing homeowner’s insurance. When purchasing a home, it’s often a required stipulation of the mortgage agreement that you secure a homeowner’s insurance policy before officially moving in. The closing process will stall if you are unable to prove your insurance status with documentation.
- Final walkthrough holdups. Though not as common as other delay-inducing problems, you may notice an issue or two when you conduct your final walkthrough. It’s an obvious red flag if the property is in worse condition than when you made your offer. The same goes for any unfinished repairs that the seller agreed to complete before transferring ownership.
Keep your closing timeline on schedule
As with most financial decisions, when it comes to closing on a home, preparing yourself ahead of time and remaining diligent throughout the entire process saves you from headaches in the future.
- Secure pre-approval ahead of time. If you fall into the category of “still looking,” it deserves to be mentioned again that getting pre-approved for a mortgage is immensely valuable. Doing this will help you reduce delays during the mortgage approval period, which is the lengthiest process of the escrow period. Not only that, but any offers you submit in the future will look more reassuring to sellers.
- Respond quickly to information requests. Even if you secure pre-approval, you’ll still need to provide various forms of documentation to your lender, your agent, and the seller. To keep the escrow period moving, stay on top of your current financial situation. Remember to review any disclosures or contracts that come your way. And if you have any questions, don’t hesitate to reach out to your lender for clarification.
- Choose the right lender fit. Choosing a high-quality lender can potentially save you some time and hardship. While large banks and underwriters may work just fine for certain types of buyers, utilizing a smaller, local lender who is familiar with the complexities and specific requirements of your market may prove to be invaluable and more time efficient.
- Schedule your inspection ASAP. The sooner you schedule your home inspection the better. A home inspection is likely to generate at least a few issues that need to be resolved one way or another before closing. Depending on what state you live in, you may even be required by law to schedule an inspection within a seven-to-ten-day period.
You may have heard this before, but buying a home is one of the biggest financial decisions you will ever make. That’s why it’s important to get it right! By controlling what you can and implementing a few proactive measures, you’ll be able to stave off the unexpected and put yourself on the fast track to homeownership.
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- “Escrow: What Is It, and How Does It Work?” n.d. Www.rocketmortgage.com. https://www.rocketmortgage.com/learn/what-is-escrow.
- “What Does a Home Inspector Look For? A Whole Lot.” 2016. Real Estate News and Advice | Realtor.com®. June 29, 2016. https://www.realtor.com/advice/buy/what-does-a-home-inspector-look-for/.
- Dellinger, A. J. n.d. “How Long Does a Home Appraisal Take?” Bankrate. Accessed April 25, 2023. https://www.bankrate.com/real-estate/how-long-does-an-appraisal-take/.