Believe it or not, you have a role in how long it takes to close on a house. Yes, there are some things outside of your control, but the more you cooperate with the lender, the faster the process goes. The process starts the moment a seller accepts your bid. The clock starts ticking and your hard work begins. If all goes well, you can expect to close on your purchase between 30 and 50 days. However, many factors determine your final timeline.
The Largest Player
Aside from you, the largest player in the process is the lender. Without their funds, you cannot close on your home. You will not have the funds! If you secure a preapproval for your loan before you put an offer on a home, you can speed the process up. A preapproval means the lender already evaluated your income, assets, and credit. The only obstacle your loan approval may face now is the title and appraisal or if you make any drastic changes to your financial profile.
When you create the sales contract, keep in mind the time it will take to secure the final approval from the lender. Despite the closing date that you and the seller agree on, you have to be able to secure financing in time. You can safeguard your position by adding a financing contingency to the contract. This allows you to back out of the contract if you are unable to secure financing by the specified date.
Waiting for Third Parties
A preapproval helps the underwriter moves things along faster. However, there are certain third parties you must wait to complete their job. The two most important are the title company and the appraiser. The title company performs a title search to determine if the home is free of any liens. They also make sure ownership transferred legally throughout the years. The last thing you want is a home that someone may still have claim to down the road.
The appraiser determines the value of the home. This document holds your loan approval hostage, so to speak. Without a high enough value, your funding could fall through. Different companies have different turnaround times for these items. Finding out the average for your area can help.
Once the underwriter has these documents, it usually only takes a week or two to complete the file. If there are any issues that arise as a result of these items, however, you may have to go back to the drawing board. For example, if the value comes in $10,000 low, you either have to negotiate the sales price again or come up with the $10,000 in cash. An underwriter has to approve both scenarios, which again, takes time.
Miscellaneous Obstacles That Can Slow Things Down
There are certain obstacles that typically slow the process to close on a house down. Some you can control, while others you cannot:
- Forgetting homeowner’s insurance – You cannot close on a home purchase until you have a full year’s worth of homeowner’s insurance paid. You must provide the underwriter with a paid receipt. You also have to verify the funds – you cannot just say the insurance was paid. You have to prove the money came from your account. If you forget this until the last minute, it could delay the process.
- Contingency issues – If you have any contingencies on the contract that come into play, they could delay the home closing. For example, if you have an inspection contingency and the home inspection comes back with serious issues, you have to figure out the next step. The underwriter has to stop underwriting while you make your decision. Whether you ask the seller to make the repairs or you pay for them yourself plays a role in the underwriting of your loan. Making these decisions and negotiations fast can help move things along.
- Issues at the walk-through – Before you purchase a home you have the right to walk through it right before the closing. If you notice something wrong that was not there before, it could delay the process. The seller is in control of this part of the bargain, so there is nothing you can do to stop it. You have the right to ask for changes if something is not right. Make sure to exercise your right.
- Title issues – If there are title issues, hopefully the seller knows about them and does the work to clear them up right away. If not, it could delay the home closing indefinitely as the title company works to find proof to clear the liens.
- Issues with funds – You have to be very careful with what you do after you sign a sales contract and have a preapproval for a loan. Do not open new credit lines, use your available credit, or make large deposits in your bank account. Any changes you make that are out of the ordinary have to be evaluated. The wrong decision could alter your approval, especially if it affects your debt ratio or credit score.
Communication is the Key to Close on a House Fast
The biggest factor to close on a house fast is communication. Without it, you never know what you need to provide and who needs it. For example, if you do not know the appraiser did not complete his appraisal, you could be waiting for weeks for nothing. Staying in communication with the seller or his agent as well as your lender will help you move things along. As soon as someone needs something, try to act fast. The longer you delay, the longer the entire process carries on. Remember, any big changes that occur have to go through the underwriter. This could add days or weeks onto the process if you wait until the last minute.
It should not take too long to close on a house if you are prepared. Take the time to secure a preapproval and freeze your finances until you close. The furniture, window coverings, and wall décor purchases can wait. The most important thing is getting to close on your home. The lender watches your every financial move and will take the time to evaluate anything that is different. Staying in contact with your lender and always offering the truth will help your process go as smoothly as possible.
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