The dream is finally coming true! You’ve put in an offer on a home and it’s been accepted. Now what?
How long does it take to close on that home and what can you expect during the process? Closing on a home is nerve-wracking and stressful even for buyers that have purchased homes in the past. If this is your first time, the process can be overwhelming.
Knowing what to expect can help ease your nerves and get you through this nerve-wracking few weeks. Read on for a simple guide and buyer’s checklist for closing on a house to help you prepare for the big day.
How Long Does It Take to Close on a Home?
Wondering how long the process is going to take from the time your offer is accepted until closing finally takes place?
This generally takes between 30 and 45 days.
What takes so long? Most of that time is spent waiting for your mortgage lender. Though you should have been pre-approved for a mortgage, the underwriter still has to gather your current financial information and process all the paperwork to generate the final approval on the loan.
Do All Mortgage Applications Go to Underwriters?
Yes. Underwriting sounds complicated, but it’s essentially just ensuring that you don’t close on a home with a mortgage you can’t afford.
Underwriters may check your credit history, order an appraisal on the property, and verify your income, savings, debt-to-income ratio, and other financial information.
If everything checks out, you will be approved for the loan and can move forward with closing on the house. If the underwriter determines that you can’t afford the loan, your application will be denied and you have to start over.
Never try to submit fake payslips to get approved for a loan. Underwriters are working to protect you as much as they are working to protect the lender. It isn’t in your best interest to take out a loan that you can’t afford. You could end up stressing your finances or defaulting on the loan, which comes with serious consequences.
Aside from taking this risk, if the fake payslips are discovered, it’s likely your deal will not close. Submitting false information can also be considered a federal offense, so it’s best to be transparent and stick with your actual data.
What About the Actual Closing Day?
Another thing people want to know when they ask how long it takes to close on a home is how long the actual paperwork process takes on closing day.
This varies depending on the way the process is being handled. If all the parties are physically gathering together, it should take about an hour or so. However, you can also do mobile or online closings, which can be faster. You also have the option of mail closings, though these will obviously be much slower.
If you are meeting physically, closings are usually held in the title company, lender, or attorney’s office. Parties present can include:
-
-
- The seller or seller’s representative
- A lender’s representative
- Notary public
- Closing agent (typically a representative from the title company)
- Attorneys for both the buyer and seller (optional)
- Real estate agents for the buyer and seller (also optional)
-
What Happens at a Mortgage Closing?
A mortgage closing is mostly just a lot of reading and signing papers. You’re spending a lot of money and binding yourself to an expensive debt, so make sure you understand everything. Read carefully and ask questions.
The paperwork you can expect to see will include:
-
-
- Deed of Trust: This is the actual document that gives the lender the right to seize the property if you stop paying on the loan.
- Promissory Note: This document is your formal promise to repay the loan.
- Escrow Disclosure: This document describes all the charges that are included in your monthly payment, including taxes and insurance.
- Right-to-Cancel Form: This document gives you three days to cancel the deal.
-
Buyer Checklist for Closing on a House
What do you need to bring on closing day? Your favorite pen, for one, because you’re going to need it!
More vital items that should be on a buyer’s checklist for closing on a house include:
-
-
- Identification: Bring your driver’s license or other government-issued photo ID.
- The Closing Disclosure: You should have received these documents three days before closing to give you a chance to review them. Bring them along so you can compare them with the papers you’ll actually sign.
- Funds Owed for Closing: Bring the funds you owe in the form of a cashier’s check or wire transfer receipt. Closing costs can include everything from origination fees to homeowner’s insurance premiums.
- Documentation for Homeowner’s Insurance and Inspections (if applicable)
-
What Will You Owe at Closing?
This brings to light another important question: what will you have to pay at closing? When you applied for your mortgage, you should have received a Loan Estimate detailing the costs you should expect to pay. These fees will also appear on the Closing Disclosure you should receive three days before closing.
These costs typically include:
-
-
- Your prorated part of property taxes
- Interest that will accrue before your first payment
- Title insurance premium
- Loan origination fees or other fees that haven’t yet been paid
- Homeowner’s insurance charge
- HOA fees (if applicable)
-
These fees are why you should never put all your available funds toward the down payment. The closing costs you’ll have to pay can add up quickly. Expect to pay between 3% and 5% of the loan amount in closing costs.
Wrapping It All Up
As the big day approaches, keep this buyer checklist for closing on a house on hand to make sure you know what to expect. You can also discuss what to expect on your closing day with your real estate professional if you have questions about your specific situation.
Once all the paperwork has been reviewed and signed, you will finally get the keys to your new home. Breathe a huge sigh of relief because the months of stressful homebuying are finally over!
Featured Image: Twenty20
