Home Loan Closing Process: How Long Does It Really Take?
June 7, 2023
7 min read
In the exhilarating world of home buying, one question often buzzes in the minds of prospective homeowners: "How long does it take to close on a home loan?" Like many things in life, the answer isn't quite as straightforward as we might hope.
The process is a complex ballet of paperwork, inspections, and negotiations—all choreographed in perfect harmony. Yet, understanding this dance can be the difference between a swift, seamless home purchase and a marathon of hurdles.
This article aims to decode the timeline of closing on a home loan, exploring the various stages, influential factors, and potential delays and providing actionable steps to expedite the process.
Factors Affecting the Closing Timeline
Closing on a home loan can take different amounts of time depending on several factors. To better understand the duration of this process and potentially speed it up, it's important to grasp these factors. Here are some key elements that can affect the timeline for closing on a home loan:
1. Loan Type
Various home loan types have their own unique requirements and processing times. For example, conventional loans typically have a faster closing process than government-backed loans like FHA, VA, or USDA loans. These government-backed loans often require additional documentation and verifications, which can extend the closing timeline.
2. Credit Score and History
Your credit score and history are crucial in the home loan approval process. Lenders use this information to evaluate your creditworthiness and assess the risk associated with lending you money.
A higher credit score may lead to faster loan approval, while a lower score or issues in your credit history might cause delays as the lender seeks additional information or requires you to improve your credit.
3. Documentation and Verification
The home loan closing process involves submitting various documents, including income statements, tax returns, and bank account information. Promptly providing accurate and complete documentation can help expedite the process. On the other hand, missing or inaccurate documents can delay the closing timeline as the lender requests additional information or corrections.
4. Appraisal and Inspection
Appraisals and inspections are essential in the home loan process, helping to determine the property's value and identify potential issues. The time needed to complete an appraisal and inspection can vary based on factors such as the appraiser's and inspector's availability and the property's condition. Delays in scheduling or completing these assessments can impact the overall closing timeline.
5. Title Search and Insurance
A title search is done to verify that the property you intend to purchase has a clear title and lacks any unresolved liens or assertions. Once the title search is complete, title insurance is obtained to protect you and your lender from any future issues related to the property's title. The time needed to conduct a title search and obtain title insurance can vary, potentially affecting the closing timeline.
6. Underwriting Process
The underwriting process is where the lender assesses your overall financial situation and the property's details to settle if the loan should be approved. This step can take some time as the underwriter reviews all the documentation and verifies the information provided.
In addition, factors such as the underwriter's workload, the complexity of your financial situation, or any document discrepancies can cause delays in the underwriting process.
Average Closing Time for Home Loans
While the exact timeline for closing on a home loan can vary depending on individual circumstances and factors discussed earlier, it's helpful to have a general idea of the average closing times for different types of loans. This information can be a benchmark when planning your home purchase and setting expectations.
1. Conventional Loans
Any government agency does not back conventional loans and typically has a faster closing process than government-backed loans. On average, conventional loans take around 30 to 45 days to close.
However, the duration of this timeline may vary—either shorter or longer—based on aspects like the lender's effectiveness, the borrower's financial circumstances, and the outcomes of the property's appraisal and inspection.
2. FHA Loans
FHA loans, which the Federal Housing Administration supports, cater specifically to borrowers with less-than-perfect credit scores or limited down payments. Still, they tend to have a lengthier closing period due to the need for added checks and requirements compared to their conventional loan counterparts.
The closing process for an FHA loan, on average, spans between 45 to 60 days, but this can fluctuate based on the borrower's specific circumstances and the lender's operational procedures.
3. VA Loans
VA loans cater to the financial needs of eligible veterans, individuals actively serving in the military, and their spouses. These loans stand out due to their advantageous interest rates and often come with the advantage of requiring no down payment.
Like FHA loans, VA loans involve additional documentation and verifications, leading to a longer closing timeline. Typically, VA loans take around 45 to 60 days to close, but this timeline can vary, either shorter or longer, based on many influencing factors.
4. USDA Loans
The United States Department of Agriculture supports USDA loans tailored for rural borrowers who satisfy specific income requirements. These loans feature low-interest rates and can potentially finance 100% of the property's value.
Due to the unique eligibility criteria and additional paperwork, USDA loans can take longer to close than other loan types. On average, the closing time for a USDA loan falls within the range of 45 to 60 days, although this duration can differ based on individual circumstances and the processes followed by the lender.
Tips to Speed Up the Closing Process
While certain factors that impact the home loan closing process may be beyond your control, there are proactive measures you can take to expedite the process and progress toward homeownership. Consider these tips to speed up the closing process:
1. Organize your financial documents
Before applying for a home loan, gather all the required financial documents, including pay stubs, tax returns, bank statements, and proof of assets. Keeping these documents readily available will save time and make the application process more efficient.
2. Maintain good communication with your lender
Establishing clear and open communication with your lender is essential throughout the home loan process. Reply promptly to requests for additional information or documentation, and don't hesitate to ask questions or seek clarification on any issues.
3. Address any issues with your credit report promptly
Assess your credit report's correctness and tackle any discrepancies or inaccuracies before submitting a home loan application. In case of a lower credit rating, consider implementing measures to boost it, such as clearing debts or addressing delinquent accounts.
4. Be available for appraisal and inspection appointments
Scheduling and completing property appraisals and inspections in a timely manner can help keep the closing process on track. Ensure you're available for these appointments and work with your real estate agent to secure the seller's compliance.
5. Respond quickly to requests from your lender or underwriter
During the underwriting process, the lender may request additional documentation or clarification on certain aspects of your application. Responding promptly to these requests can help prevent delays and keep the process moving forward.
6. Obtain a mortgage pre-approval
Securing pre-approval for a mortgage can provide a jumpstart in the home loan process. It showcases your financial preparedness to prospective sellers and lets you pinpoint any potential concerns that may require resolution before the loan application.
7. Choose an experienced and efficient lender
Working with an experienced lender with a track record of efficient loan processing can significantly affect the closing process. Conduct a thorough search of lenders, peruse reviews, and solicit recommendations from loved ones or your real estate agent to pinpoint a lender that aligns with your requirements.
While you may not have sway over every element of the home loan closing process, following these tips can help you stay proactive and prepared, ultimately speeding up the process and getting you closer to owning your dream home.
Closing With Confidence
Closing on a home loan is a crucial and intricate process that necessitates a basic understanding of the timeframe involved to ensure a seamless experience. On average, this process can range from 2 weeks to 2 months, including pre-approval and finalizing closing documents.
However, being well-prepared will contribute to a quicker overall process. Partner with a trustworthy lender who can navigate you through every stage of the home loan experience and hasten the closing process.
