You finally found it, the perfect house. You got your pre-approval at the bank for a mortgage loan and you made your offer. Maybe it took a little negotiation, but the earnest money has been paid and you are under contract. All that is left to do is close. So how long is it going to take before you get to move into your perfect new home? The actual settlement date (the day you get possession of your new home) is agreed upon in your Contract to Purchase. Typically, this is 30-60 days from contract ratification date. Settlement date could be much longer if you are having a new home built.
It takes about an hour for everyone to sit down and sign the closing paperwork. However, it typically takes between 30-60 days from the time the home goes under contract until the you go to the closing table, and there is a lot going on in that time.
If you have not already picked out Settlement Attorney, then it is time to do that.
After the contract is finalized, it needs to be sent to the Mortgage Company and the Settlement Attorney and the Sellers Attorney. If you have a Real Estate Agent, they will send the contract over for you, if not then the Buyer will have to deliver the contract themselves.
The Mortgage Company:
Assuming that a loan is needed to purchase the property, the Buyer will have to complete an official loan application, which is different than the pre-approval application that they may have already filled out. They will need to provide identity verification documentation, bank statements for the past several months, proof of residency, tax history, and employment history. Once the Mortgage Company has all the paperwork they need from the Buyer, which can take a few days to assemble, there are a couple things they need to do before issuing the loan:
1. Run a detailed credit check and verify the information found in the credit report This can take a week or more depending on the Buyer’s credit history.
2. Verify employment Typically written confirmation of employment is needed, not just a phone call so it can take 1-2 weeks in order to file a formal request with HR and get all the necessary documents back to the Loan Officer.
3. Compare bank statements (generally from the past 3 months) to reported income
The Loan Officer is usually looking to make sure there are no large, unaccounted for deposits or expenditures and there is enough money in the account for closing costs and “resources” to make mortgage payments for the first few months. Anything that seems out of the ordinary could require further investigation.
4. Verify that the Buyer has purchased homeowners insurance for the property
5. Request an official appraisal of the property
It typically takes 1-2 weeks for an Appraiser to get out to the property and do all of the research they need to determine the value of the home. If the appraisal comes back low there may be additional steps that need to be taken including renegotiating the selling price on the property in order to be able to obtain a loan.
6. Request a title check
7. Compile all documents and send them to the Underwriter The Underwriter reviews the information provided by the Mortgage Company and decides whether the loan will be approved, denied, or if more information is needed. Once their review is done the report is sent back to the Mortgage Company. This process typically takes about 1-2 weeks.
The Title Company: In order to get a loan, most Mortgage Companies require title insurance. To get title insurance, there will need to be a title check on the property.
To get a clear title:
1. The Title Abstractor will go to the County/City/ Locality and research the deed. This can be done as quickly as 1 day if the title is clear, but can take much longer if anything complicated is going on or they find any ambiguity or “clouds” on the title.
If the Seller has a copy of their policy it can really speed up the title search process.
2. Compile all the documentation from researching the deed and send it to Title Examiner to review and determine if the title is insurable, this process can take another 1-2 weeks to complete
3. Depending on the Property, the Title Company may require a survey of the land to determine property boundaries. This usually happens for larger tracts of land or land in rural areas because boundary lines can be complicated, it is not usually required in Cities or Neighborhoods. If the property does need a Surveyor, that can take an additional 1-2 weeks to get someone out to the property, mark the boundaries, and have a report written up.
Once the Mortgage Company has all the documents back from the Underwriter and Title Company, they will present the loan options to the Buyer. The Buyer will then have to sign off on the terms and rates of the loan. After the Buyer signs off, the Mortgage Company will send all of their documentation to the Settlement Attorney. For the average buyer it will probably take a minimum of 3 weeks for the Mortgage Company to get through everything they need but it could take longer if they run into any holdups along the way.
The Settlement Attorney:
While the Mortgage Company is assembling their documents, the Settlement Attorney is working on the “Settlement Package” which contains all of the important information needed for closing, including:
1. All of the Documents from the Mortgage Company, Appraiser, Title Company and the Sellers Attorney.
2. All Insurance information including Homeowners Insurance and Title Insurance
3. A Settlement Statement listing all of the money; where it is coming from and where it is going, including all bills, fees, commissions, and credits
4. A signed Deed and Sellers current mortgage payoff information (if applicable) sent over from the Seller’s Attorney.
5. A termite report that is sent by the Seller’s termite inspection company. Mortgage Companies generally will not lend money on a property if termites or other woodboring organisms are found and the infestation is not remediated, so an official termite report is necessary for the sale. It can take 1-2 weeks from the time the seller schedules the inspection to get a termite inspector to the property.
6. A home inspection done on behalf of the Buyer ensuring that the house is to code and there is nothing dangerous or physically wrong with the property. If the home inspection comes back with problems then the Buyer and Seller will have to go through additional negotiations in order to have the issues fixed or have credits given to the Buyer for repairs. This negotiation process can be very quick or drawn out to the limits set in the contract depending on what is wrong and how willing the parties are to come to terms.
7. If applicable, an Home Owners Association information packet that outlines:
a. All HOA rules
b. HOA Fees
c. And states that the property is currently in compliance with the HOA guidelines.
8. Sign off from the buyer that they have completed a final walkthrough of the property, it looks good, and everything that has been contractually agreed upon has been done.
9. The Settlement Attorney will collect the keys to the property from the Seller so that they can be released to the Buyer as soon as settlement occurs.
Once all of the contingencies of the contract have been met, the Settlement Attorney compiles all of the documents into the Settlement Package that they send out to all parties involved in the transaction for review. If everyone agrees that the information is correct and all of the money has been properly put aside, then the closing is ready to happen, but if there is an issue, then the attorney will have to go back and make corrections.
The last step of closing is sitting down and signing the closing documents. In some cases, the documents can be signed electronically or via the mail but traditionally signing happens as a face-to-face meeting. In order to read every single document at the closing table would probably take all day, so it is important to have an Attorney or Settlement Agent you trust who can point out what is important and what can be breezed over. It is possible to sign everything in as little as 20 minutes but typical closing takes about 1 hour.
Once the Buyer, Seller, and all other parties involved sign off and both the Buyer and lender have deposited all of the funds that they owe into the escrow account, then the Settlement Attorney will record the new deed, release the funds from the escrow account so that everyone gets paid and give the keys to the Buyer.
A typical closing time of 30-60 days leaves most people plenty of time to get everything done with very little last-minute scrambling. However, there are circumstances that can make closing go much faster, or take much, much longer.
Closing in Less than 30 days:
1. It is possible to close in as little as 2 weeks if everyone is in sync and working quickly. Although unless the people you are working with also have some ability to put your application at the top of the list for the Underwriter, Appraiser, Home Inspector, and Title Company; 2 weeks might just be an idealist pipe dream. Realistically most of these people have long lists of properties to look at, and yours will end up on the bottom of that list.
2. If you are a cash buyer (meaning you are able to pay for the property outright and do not need to take out a loan) it is possible that you could close in as little as 1 week. In order to get it done that quickly, you may have forgo having an inspection or an appraisal which can be risky if there are hidden problems, but if you want it done quickly, you do have that option. You will still need the title cleared and the deed written up, which is why it will still likely take at least a week but could take more than a week if offices are backed up and you do not have any connections to help bump your name to the top of the waiting list.
3. If you are “buying” your home as a Family Transfer or receiving a Gift Deed, you could have it closed in less than 1 week. Chances are you do not fall into this category, but if for some reason you do, it can be a very quick turnaround since you can pretty much forgo everyone except for a singular attorney to draft up the new ownership papers. It is not necessarily the safest option regarding protecting the personal interests of everyone involved, but it is probably the cheapest, fastest, and easiest.
Closing in more than 60 days:
1. The Buyer was not pre-approved for their mortgage loan and they ran into problems getting lender approval.
2. Clouds on the Title
If the seller does not possess a clear title it can take weeks or even months to track down anyone who may or may not own claim to the title.
a. They bought the property while married, have since divorced but never took their ex’s name off the deed or mortgage
b. There were multiple owners but one of them died and may have passed their interest on to another party in a will (someone will have to find the will and determine clear ownership or find the beneficiaries of the will and have them sign off on the sale)
c. The property has changed hands between family members and it is difficult to determine the recognized legal owner
d. There is a lien on the property and there is not a current plan to pay it off either before closing or with the money from the home sale
3. Complicated land purchases
Large tracts of land often have pieces sold off or added on throughout the years, it can sometimes take a while to track the title history if land has been split or combined.
4. Major issues found in the Home Inspection If there are significant problems found during the home inspection, it can sometimes take a while to get through all of the negotiations needed to get the home fixed. Additionally, if the Seller decides to have the repairs done themselves rather than giving a credit at closing, it can take time for the repairs to be completed.
5. Either the Buyer or the Seller does not want to close in less than 60 days Closing time is a choice that must be agreed upon by the Buyer, Seller, and lender. Most lenders will not agree to a closing time in less than 30 days because it will not give them enough time to get all of their work done.
6. New construction
Having a new home built can take 6 months or more for construction to be completed.
Fun Fact: Closings typically takes a little longer if you are closing at the end of the month because closing at the end of the month can sometimes be a little cheaper due to prorated interest charges, which leads to more backups since more people are usually trying to close then!
*This article was originally part of a submission to WalletHub
Comments