When purchasing a home, negotiating and agreeing on its purchase price may not take overly long. However, there’s more of a process that must occur before the home legally becomes yours. This won’t happen until closing takes place.
Below is a basic guide with regards to the average time it can take to close on a home.
Home closing can take as little as a week or as long as three months, depending on circumstances surrounding the sale. However, as of August 2020, the Ellie Mae Origination Insight Report noted that the average time it took to close on a home was approximately 45 days.
Steps Required to Close
- Signed Purchase Contract
After negotiating a purchase price, the closing process can start, and the purchase contract will also include an expected closing date.
- Earnest Deposit
Buyers usually submit a small deposit along with their offer to purchase a home. This is called an earnest deposit, and it’s kept in an escrow account.
- Due Diligence Period/Home Inspection
Purchase contracts make provision for buyers to have various property inspections performed and to back out of the contract or request to have specific repairs made. This can take between 3 and 10 business days – or longer if extensive repairs are needed.
Lenders require this, but it’s optional if you’re paying cash for the property and it’s a professional determination of a home’s value. Lenders require this to ensure they don’t loan more money than the home is worth and it can help prevent overpayment on cash sales.
Obtaining a mortgage can sometimes take a month or more because you’ll need to provide lenders with proof of income and expenses before funds can be provided.
Purchase contracts sometimes state that buyers only have to follow through with the purchase if their existing property sells. If this takes longer than expected, serious closing delays can occur.
- Title Search/Insurance
This ensures that once you’ve bought property, no one else will be able to claim it later. If title issues arise later, title insurance will protect you and the lender against financial loss. It takes approximately a week for title companies to complete the search and insurance process.
- Final walkthrough
On closing day or the day before, you’ll normally be able to inspect the property to confirm that you’re accepting it in its current condition. This isn’t mandatory, but is strongly recommended.
- Fund Transfer
Before closing occurs, all of the buyer’s funds to cover the purchase price and closing costs must be in place, including mortgage funds, down payment and earnest deposit.
This is when you meet with your real estate attorney or closing agent and your estate agent, obtain your closing disclosure and settlement statement. You’ll be required to sign a ream of paperwork so that the property legally becomes yours.
If a lender states that at least 30 days are needed to close on your loan, ensure that you prepare for a closing time of approximately 45 days instead. This will allow everything to be processed as needed so that you can take ownership of your new home.