Real estate professionals commonly estimate that the house-closing process lasts between 30-45 days. However, data from Ellie Mae shows that it takes homebuyers 50 days, on average, to close on a new house as of September 2021.
The nearly three-week difference between the lower 30-day estimate and the actual national average boils down to theory versus practice. Your home close could take 30 or even fewer days if everything goes smoothly. However, the closing process consists of many moving parts. A single delay at any point in the process could delay your close by days or even weeks.
Many homebuyers assume a long closing process is just part of doing business in the modern housing market. However, short closing periods are possible for any homebuyer who takes the time to understand the process and implement a few simple tips.
What are the key steps in the closing process?
The oft-cited “30-day” minimum figure stems from the average time it takes to complete the following tasks:
1. Application process and documentation requests: 1 week
Well-prepared homebuyers can complete these tasks within a matter of days. First, you need to formally apply for your mortgage. Your mortgage lender will then need to see documentation pertaining to your identity and finances, such as:
- Tax returns and W2s
- Proof of assets, such as retirement account and bank statements
- Debt statements
- Your credit report
2. Appraisal, the underwriting process, and conditional approval: 1-2 weeks
These tasks occur in the middle of the closing process. Your bank first completes an appraisal to ensure the loan money you’ve applied for aligns with the actual value of your house. Then, the underwriters get to work verifying the information you provided to ensure you are capable of paying back the lender. Your lender may conditionally approve your loan while waiting for additional closing documents from you.
3. Clear-to-close and final closing review: 1 week
Your mortgage company will issue a closing disclosure detailing the terms of your mortgage once they’re satisfied with your application. Your lender is then legally required to give you three days to read over the disclosure before you can sign off on the mortgage. Finally, you’ll meet with a closing agent to seal the deal, and your new house will be officially transferred into your name.
Total time to close: 4 weeks, or roughly 30 days
What obstacles affect how long it takes to close on a house?
The fact that the average home takes 50 days to close instead of 30 reveals just how often the closing process hits a stumbling block. Certain seller-related obstacles — like title concerns — are out of your control, but there are many (often avoidable) ways you may delay closing times as a buyer.
1. Financial changes
Lenders don’t make money by loaning money to borrowers who can’t pay them back. Your lender deeply scrutinizes your current financial situation before making a determination as to whether they’ll approve your mortgage. Any major financial development occurring during the evaluation stage may force the underwriter to start back from square one with your application.
Most borrowers understand a good credit score and stable employment situation help make a better case for approval. Severe financial issues that impact you in these areas may even cause a mortgage company to reject your application outright.
Those looking to avoid prolonging their closing process should avoid:
- Changing jobs
- Missing a bill payment
- Bouncing a check
- Making a major purchase, like a new car
Contingent offers force sellers to satisfy certain conditions before closing can move forward. This protects buyers from completing a problematic transaction, but meeting certain contingencies takes time and extends the time it takes to close.
Contingencies are an important means to protect a homebuyer’s interests during a home sale. For example, a title contingency gives homeowners a way out of a sale in the event of title issues, such as if a title search produces evidence of liens against the house.
However, the more contingencies that are included in a home offer, the longer the closing process can take. Additionally, sellers may choose an offer with fewer contingencies over one with more in hotter housing markets.
Some of the more common contingencies include:
- Financing contingencies. This contingency guarantees that buyers will have a set amount of time to find a way to finance their new home purchase. If they cannot do so within this time, the buyer can walk away without having to pay a fee to the seller.
- Home sale contingencies. These force sellers to grant buyers a certain amount of time to sell their own house. If the home does not sell by the end of this period, the buyer can walk away from the sale without penalty.
- Appraisal contingencies. Your lender will require a home appraisal of the new home to ensure that the amount you’re asking for aligns with the home’s determined market value. If the appraisal comes in lower than the purchase price, the sales price will need to be renegotiated, or the buyer will need to provide the difference themselves. Otherwise, this contingency allows the buyer to walk away from the sale.
3. Delayed response times
Your lender will contact you constantly throughout the closing process to ask for documents, documents, and more documents. Many first-time homeowners especially don’t realize the amount of communication required to get a mortgage approved. Any delay in the returning of even a single email or phone call stands to increase the amount of time it takes the underwriters to sign off on your loan.
4 ways buyers can speed up the closing timeline
Certain aspects of closing on a home are out of your control, but there are a few steps you should take to streamline the process. Homebuyers who manage to close quickly, often:
Before you even start searching for a home, find a lender to work with on getting pre-approved for a mortgage. Pre-approval allows your lender to estimate how much they’d be willing to loan you based on your income, assets, and credit score. Pre-approval doesn’t guarantee formal approval for your mortgage once you find a home to buy, but it gives you a sense of what price range your lender is likely to approve you for.
Pre-approvals minimize the risk that a homebuyer will attempt to buy a house that they ultimately cannot afford. No one wants to spend weeks in the closing process only to find out that their deal has fallen through due to financing issues. Sellers prefer offers from buyers with pre-approvals for this same reason.
Additionally, a pre-approval forms the basis of your eventual home loan application. Your lender will have the documents you submitted for pre-approval on hand, saving you from wasting time looking for tax returns and Social Security numbers during the closing process. You’ll likely have to submit additional documentation for your official mortgage application, but a pre-approval will still save you from a good deal of back-and-forth at closing time.
Schedule the appraisal ASAP
Work with your lender to schedule the appraisal as soon as your loan application is accepted. As mentioned, your lender will most likely require an appraisal of your new home to make sure what you’re approved for coincides with the value of the property.
The actual appraisal only takes a few hours, but a busy appraiser may not be free for days or weeks. They’ll also require time to write the actual appraisal report and deliver it to your lender, so be sure to make yourself available for the appraiser’s first open appointment.
Come prepared on closing day
It’s easy to assume smooth sailing once your lender approves your mortgage, but there’s still one potential cause for delay: your closing date. Your home sale becomes official at this meeting, but you’ll need even more documentation to finish the job. The lack of final paperwork may only push back your close by hours or even a couple of days, but any delay that close to the finish line is sure to frustrate.
Anticipate this potential roadblock and bring these items to your closing meeting:
- Your closing disclosure
- A certified cashier’s check covering the closing costs outlined by your lender
- A copy of homeowners insurance
- Your photo ID
- Any documents requested by your lender
Use cash offers to eliminate contingencies and close faster
A little forethought and a good deal of preparation will help you minimize the amount of time it takes to close on your house. Thirty days may be on the low end of the average estimate, but some homeowners are able to close on their homes even faster.
Take Kyle Donald. Kyle managed to close on his new house in just 14 days in a hot Atlanta market — 36 days faster than the national average.
Kyle and his real estate agent used an increasingly popular method to get the win and speedy close: the cash offer. He showed up to the bargaining table fully qualified for an all-cash offer through Homeward. He proved he had liquidity upfront with our Buy with cash solution, eliminating the need for a financing contingency. He also didn’t need to worry about a home-sale contingency because Homeward allows customers to Buy before you sell.
Cash offers have become hard to beat, with almost a quarter of home sales involving all-cash transactions. Kyle had the right idea: using Homeward as a means to sweeten his offer and facilitate a quick close. For those tired of waiting on their next home, it’s hard to find a better tool than all-cash offers with help from Homeward.