The closing process on a home purchase can take anywhere from a week to 60 days, depending on the property type, whether or not you’re buying with a mortgage and what type of loan you’re taking out. The closing process includes two distinct periods:
Escrow is the period of time between when you and the seller sign the contract and the day you close.
Closing day is the day you sign all the paperwork, get the keys and become the official owner of a home.
Part of what makes closings take so long is the financing requirements, so buying with cash can expedite the process. If you’re buying with cash, you can close as few as seven days after contract execution, assuming you’re willing to waive contingencies. However, only 23% of buyers purchase their homes with all cash, according to the Zillow Group Consumer Housing Trends Report 2018.
Buyers who use conventional financing to purchase a home can expect to close 30-45 days after the contract is signed. Special loans, such as first-time home buyer programs, VA and FHA loans can take longer to close because the requirements are stricter.
After you’ve made an offer on a home and both you and the seller have agreed on terms (including price and closing date) and executed the contract, you’re officially in escrow. These are the steps that are usually part of the escrow process, and how long each step typically takes. Keep in mind that the escrow process and timeline can vary based on your market, lender, property type, financing type and the overall complexity of the transaction. You should also note that some of the steps below happen concurrently.
According to Zillow Consumer Housing Trends Report 2019, 57% of buyers who attained a mortgage said one of their concerns was being unclear on how the mortgage process works. To make sure you fully understand the steps, stay in close contact with your real estate agent, real estate attorney (if you have/need one) and lender. They’ll be able to answer any questions you have and provide documents you need to sign, so be available to turn those requests around as quickly as possible.
If you’re buying a home with all cash and still including common contingencies (like a home inspection contingency), your process will be the same, except you won’t have to do a mortgage application or wait for loan underwriting and approval. Some cash buyers opt to waive contingencies, which can speed up the process.
Assuming there are no issues with your appraisal, the lender will send the “clear to close” about a week before the agreed-upon closing date. If you’ve requested a longer escrow period and a later closing date, you may get your “clear to close” well in advance of your closing date.
Your closing date will usually be agreed upon with the seller during offer negotiations. But, your closing date could get pushed back a few days (or even a few weeks) based on unexpected setbacks. Here are some of the common issues that can lead to a delayed closing.
Most of the time, delayed closings are related to finalizing your mortgage. This can be anything from appraisal concerns to missing financial documentation to an inexperienced loan officer.
If you’ve made large purchases, taken out another loan that negatively impacted your debt-to-income ratio or had a significant change in your income between the time you were pre-approved and closing, your lender may need to re-evaluate your credit profile, which can take time.
If your appraisal comes in at or above the contracted sale price, it should be smooth sailing. But, a low appraisal could leave you needing to renegotiate with the seller or come up with enough cash to cover the difference between the home’s appraised value and the sale price.
If the seller has any unresolved liens or judgments on the home, or if any other ownership disputes are uncovered during the escrow process, the closing can be delayed while these issues are resolved.
In order to close, you must have proof that you’ve secured a homeowner’s insurance policy on the property you’re buying. If you miss this step or don’t have the correct documentation, your closing could be delayed.
If your contract says you can’t close until your previous home sells, your closing could be delayed if it takes longer than expected.
If you’re going back and forth with the seller on repairs needed based on the home inspection report, both the negotiations and the repairs themselves can slow down your closing timeline.
Right before closing, you’ll do a final walk-through of the property. If the home isn’t in the same condition (or a better condition, if you negotiated repairs) than when you made your offer, you may delay closing until issues can be resolved.
Even if you’re buying with a mortgage (and you’ll be among the 77% of all buyers who are), you can help expedite the closing process by being prepared, responsive, diligent and decisive both before and during the escrow period.
Before you even start searching for homes, take the time to get pre-approved so you’ll know ahead of time that you’re eligible for a loan in the amount you need. Not only will it help you prevent delays during the escrow period, but it will make any offers you submit look more legitimate in the eyes of sellers, since they know you can pay for the home.
For a pre-approval, you’ll need documents that verify your income, like paystubs, bank statements and tax returns. You’ll also want to make sure your credit report is error free, as your lender will run your credit as part of your pre-approval.
As soon as your offer is accepted and the contract is executed, schedule your home inspection. In some states, you are required to schedule the inspection within 7-10 days. After you receive the inspection report, you will have a few days to review and request repairs or credits from the seller. Keep in mind, the seller will have a few days to respond as well.
Buyers of Zillow-owned homes can have peace of mind that the home has been recently updated by licensed contractors. Of course, you’re still able to do your own independent home inspection.
Appraisal reports can vary, and very rarely do two professional appraisers value a home exactly the same. If the home you’re buying appraises for less than the sale price, your lender won’t let you finance the home using the full sale price. If your appraisal comes back low, you have two options: either make up the difference in cash, or renegotiate the sale price with the seller. If you’re in a hot market where sellers have their pick of multiple offers, you shouldn’t expect the seller to lower their price to accommodate a low appraisal.
Find an experienced lender that is familiar with the intricacies and requirements of your market for a seamless and transparent closing process. Opt for an online lender to further optimize your experience. In fact, 15% of buyers who used a mortgage to finance a home in 2019 obtained their mortgage through an online lender. Though, younger buyers are more likely to choose an online lender option.
It’s likely that your lender will need updated financial documents, signed disclosures and other information as they prepare your loan for closing. Your title or escrow company may need you to complete certain tasks, too. Respond to all requests as quickly as possible to keep the escrow process moving forward.
Closing day — that is, the day you go to the closing agent and sign your final paperwork to buy the home — typically takes between 1.5-2 hours if everything goes smoothly, but you’ll want to leave ample time in your schedule in case it takes longer.
During your closing appointment you’ll sign documents (a list of typical documents is below) and pay your down payment. Your lender will also wire the balance of the sale price at this time. The title or escrow agent will facilitate the closing appointment, but you’ll want your agent and/or attorney to be present as well. In closing attorney states, the attorney may facilitate the closing appointment. Be sure to bring your ID, a cashier’s check, proof of insurance and your purchase and sale contract.
Buyers usually must attend this meeting in person, whereas sellers can sometimes sign their paperwork ahead of time.