Purchasing a home is undoubtedly one of the most impactful decisions and investments you’ll ever make. It can be quite an intricate and nerve-racking journey, filled with various stages and individuals involved.
One of the ultimate and highly pivotal steps in this journey is closing on a house – this is where the deal gets sealed, and you officially become the legal owner of your new home.
- But just how long does it take to close on a house?
- Are there any factors that could potentially influence this timeline?
This article aims to answer these burning questions by providing an in-depth overview of the house closing process, including its typical duration.
What is House Closing?
House closing, often referred to as settlement or escrow, represents the ultimate stage in a property purchase where ownership shifts from the seller to the buyer. This end step entails signing all necessary paperwork, finalizing financial exchanges, and culminating with the keys being handed over to the new homeowner.
It’s important to note that house closing isn’t a single moment but unfolds as a series of activities that need to be finalized before the transaction is complete. Some of these tasks occur prior to the official closing day, while others are completed on or after this date.
Pre-Closing Activities: Laying The Groundwork
Before reaching the actual house closing, several preliminary steps must be fulfilled. These actions are crucial for ensuring that your chosen property aligns with your expectations and demands, and they provide assurance that there are no potential legal or financial hiccups that could impede your transaction.
Typically, pre-closing activities commence once you’ve placed an offer on a property and received approval from the seller.
Depending on your contract, you may have some contingencies that allow you to back out of the deal if certain conditions are not met. These conditions may include:
Home Inspection and Appraisal
A home inspection is a thorough examination of the property’s condition and features by a professional inspector. The inspector will check for any defects, damages or safety hazards that may affect the value or functionality of the property. The inspector will also provide you with a detailed report of their findings and recommendations.
A home appraisal is an estimate of the property’s market value by a licensed appraiser. The appraiser will evaluate the property’s size, location, condition, quality and features, and compare it with similar properties in the area. The appraiser will also provide you with a written report of their valuation.
Both the home inspection and appraisal are usually done within 1-2 weeks after the offer acceptance. They are important for two reasons:
- This process aids you in validating whether the property’s value is worth the price you’re willing to pay for it, and if there are any significant issues that require attention or negotiation with the seller.
- It also allows your lender to determine if the property fits their lending standards and decide whether they’re willing to approve your loan based on its appraised value.
Loan Approval
Achieving a loan approval is a pivotal step in the pre-closing process. In this phase, your lender will review your credit history, income, assets, and liabilities. After evaluation, they decide whether they’re prepared to lend you the funds necessary to purchase the property. They’ll also set forth how much they can lend you, the interest rate applicable to your loan, and lay down terms and conditions surrounding it.
The duration of the loan approval process varies depending on individual lenders and unique financial scenarios but typically extends between 30-45 days. During this timeline, be prepared to provide supplementary documents such as pay stubs, bank statements, tax returns, or proof of insurance. You might also be required to lock in your interest rate or bear some additional fees tied up with your loan.
When approved for a loan, expect an issuance of a commitment letter from your lender detailing your loan contract specifics. It possesses an expiration period (generally 30 days), during which completion of house closing must occur.
Title Search
A title search is a legal procedure confirming if a clear and valid title attached to the property lies with its seller – indicating that they reserve rights for sale without any liens or claims made by third parties against it. This search also uncovers any easements or limitations linked with property usage that could potentially hinder enjoyment.
Typically conducted by either a specialized real estate attorney or a title company, these professionals investigate public records like deeds, mortgages judgments plus tax liens or lawsuits connected with said property. A summarizing report detailing findings and flagging potential title defects will be provided as part of this service.
Time taken for a title search may span two weeks to an entire month depending upon clarity surrounding issues about titles. Any discrepancies regarding unpaid taxes or liens from prior owners or creditors need resolution before house closing can proceed. This might entail clearing off debts via payment releases or waivers obtained from lien holders or even initiating lawsuits where necessary.
The House Closing Timeline: How Long Does It Take?
Post completion of all pre-closing activities and addressing contingencies prepares you for stepping into the actual house closing procedure.
Circumstances like state regulations affect how long this process takes but usually involves:
Reviewing Closing Documents:
This stage commences when you receive your closing disclosure (CD) document from lenders – outlining costs related to mortgage transactions including amount of loans needed at closures along with received amounts from other sources.
Comparing CD With Loan Estimate (LE):
The LE document reveals estimated costs similar but not identical due to varying market conditions among other factors; hence careful CD analysis eliminates discrepancies between both documents ensuring comprehensive understanding alongside agreement on all terms plus charges.
Following Truth in Lending Act (TILA):
Stipulated federal law mandates three-day turnaround time after CD receipt – one day allocated for obtaining CD followed by three business days allowed for review; should there be corrections needed onto CDs post review another waiting period ensues before proceeding onto subsequent steps.
Remember – immediate communication with agents concerning CDs can address queries swiftly avoiding potential errors during these stages.
Signing Day
Following a successful review and approval of your CD comes “Signing Day”. This is the day when you meet with all the parties involved in the transaction, such as your agent, the seller’s agent, the title company representative, the escrow officer and possibly an attorney. During this meeting, you will sign all the necessary documents to finalize the deal, such as:
- The promissory note: This is a document that states that you promise to repay your loan to your lender according to the terms and conditions specified in it.
- The deed of trust or mortgage: This is a document that secures your loan by giving your lender a lien on the property until you pay off your loan in full.
- The title deed: This is a document that transfers the ownership of the property from the seller to you.
- The settlement statement: This is a document that shows how all the money in the transaction is distributed among all the parties, such as how much money goes to pay off the seller’s loan, how much money goes to pay for closing costs and fees, and how much money goes to you or the seller as proceeds.
- The escrow instructions: These are documents that instruct the escrow officer on how to handle and disburse all the funds in escrow, such as when to release them to the seller or to pay off any liens or debts.
- Other documents: Depending on your state and situation, you may also need to sign other documents such as disclosures, affidavits, acknowledgments or warranties.
While some might assume that signing would be quick and straightforward – it often isn’t!
Each document needs careful reading and understanding to avoid future complications or disputes.
Signing could take several hours depending on how many documents there are and how fast or slow each party signs them.
Post-Signing Period: Final Steps
After all the documents are signed and submitted, they need to be processed and recorded by relevant entities such as your lender and local land records office. This step is known as “funding” or “recording”.
Depending on these entities’ efficiency levels, funding or recording could last anywhere from a few hours up to two days.
Once funding or recording is done successfully, then congratulations – you’re officially a homeowner! You will receive a confirmation from your lender or title company that everything is complete and that you can take possession of your property. You will also receive copies of all the documents that you signed for your records. Finally, you will get the keys to your new home from your agent or seller.
Therefore, overall closure times range broadly based on unique circumstances but typically it takes about 41-47 days from accepting an offer until getting keys handed over.
Factors That Influence House Closing Timelines
It’s important to note that there are various factors that can potentially delay or expedite house closing timelines. Some of these factors are:
- Financing Delays: Any issues with securing financing can prolong closures. For example, if your lender needs more time to verify your income or assets, if your credit score changes significantly during the process, if your appraisal comes in lower than expected, or if interest rates fluctuate dramatically.
- Inspection Contingencies: Discovering significant problems during inspections may lead to back-and-forth negotiations or repairs, thus delaying closure. For example, if the inspector finds termites, mold, structural damage or faulty wiring in the property, you may want to ask the seller to fix them or lower the price, or you may want to walk away from the deal altogether.
- Legal Problems: Encountering legal troubles such as disputes over property lines or unresolved liens might cause substantial delays. For example, if the title search reveals that there is a lien on the property from a previous owner’s unpaid taxes or debts, you may need to wait for the seller to clear it or sue them to remove it.
- Seller’s Readiness: If the seller is not ready to move out promptly upon selling their property, closures will inevitably be pushed back. For example, if the seller has not found a new place to live, if they have personal or family issues that prevent them from moving, or if they simply change their mind about selling.
Bottomline
In conclusion, while knowing the average timelines helps set expectations, preparing for potential delays ensures smoother sailing through the exciting yet often tumultuous waters of home buying.
By understanding the concept of house closing and its various stages and factors, you can better plan and prepare for your own house closing process and achieve your dream of homeownership.
