Now that it’s summer, you are probably seeing For Sale signs everywhere. Makes sense because summer is prime real estate season. Are you ready to buy or sell a house? After the decision is made, I get this question all the time, “how long does it take to close on a house?”
Although this should be a relatively smooth process (thousands of home sales close everyday), the closing process is actually taking longer with the average length of time being 50 days.
There are also a few bumps in the road that can slow down the process. Here are the usual causes:
- Money- This is listed first for a reason. Money or the lack of it will bring a scheduled closing to a screeching halt. If the underwriter at the bank has not approved the loan, the required deposits have not been made, etc. Your closing WILL not happen until these issues are handled.
- Inspection issues- Any and all property issues that come out of the inspection must be taken care of before the sale of the property can be completed. This can be handled two ways, either the seller completes the repair or they can give a credit to the buyer in the amount that it would take to make the repair and buyer can do it themselves.
- Low appraisal value- This can be big. The bank is not going to approve a loan for more than the property is actually worth. That would leave a homeowner starting out with the property underwater. The property must appraise for at least the loan amount, even better if it appraises above that.
- If the buyer needs to sell their existing home or the seller needs to buy a new home (which is pretty common these days) this could also cause a delay in getting the closing done.
- Unexpected debt- In the beginning of the approval process, the bank may have completed a property records search and they will also do another one right before the scheduled closing, if there is an unexpected lien or judgement that will definitely delay the closing.
- Credit report issues- This one can catch everyone off guard. If the bank asks for an updated copy of the buyer’s credit report and there is more debt or a new late payment that will affect the closing while it is being sorted out. I have even seen where a buyer had to pay off a credit card to bring his debt to income ratio back into the acceptable range for the mortgage lender.
- Updating submitted financial documents- Before the closing, all financial documents (credit reports, bank statements, and paystubs) have to be current; you cannot move forward with the initial documents that you submitted 6 months ago when you first applied for the loan. It can take a week or two to get these if you don’t already have them and that can delay the closing. It’s always good to keep updated copies of these documents on hand because you never know when you will need them.
- Homeowners Insurance- Waiting until the last minute to secure insurance can slow down the closing process. It takes more than just a phone call, so this should be completed as far in advance as possible.
The closing process can seem daunting, but if you have a good real estate agent and banker keeping you on your toes, you will sail through fine.