How long does it take to close a loan?
The time it takes to close a loan varies with the type of mortgage, buyer/homeowner situations, and lender processing efficiency. However, you should keep in mind that a typical mortgage loan will take around four to six weeks to close. The most common step is for you to have a completed application as soon as possible. You must understand that some loans require a slightly longer period to reach closing.
How long does it take to close on a home?
The question most people ask themselves: how long does it take to close on a home? – requires a two-part response:
- How long does it take between filing a mortgage application and the actual closing day? Approximately 30 to 45 days. With electronic data collection and increasing competition, lenders are reducing this time frame. However, according to Ellie Mae (a technology company that serves mortgage lenders), the average to close on a mortgage was approximately 43 days for the 12-month period ending in July 2019.
- How long does it take for the closing itself, to review and sign all the loan documents? If your loan settlement or closing takes place at a table with all the parties together, allow at least an hour or so. There are also mobile, mail, and online closings that can be much faster or slower.
Typical Closing Times: By Loan Type
Different types of loans take longer to close based on program requirements and guidelines. Below is a breakdown of the average closing times, in days, between average mortgages, FHA loans, and VA loans:
Average Closing Time for a Conventional Loan
It takes approximately 47 days to complete a conventional mortgage in accordance with Fannie Mae’s qualified loan standards. Conventional refinances are faster and take around 35 days to complete on average.
Conventional mortgages follow the more traditional path, from demand to closing and financing. Unlike FHA and VA loans, there are generally no specialized underwriting, appraisal, or approval requirements beyond Fannie Mae or Freddie Mac guidelines. Generally speaking, refinances will take much less time to complete than new purchase loans.
Average Closing Time for an FHA Loan
It takes approximately 47 days to close on an FHA mortgage. FHA refinances are faster and take about 32 days to close on average.
FHA loans typically close in a very similar time frame to conventional loans but may require additional time at specific points. For example, FHA loan appraisals must be performed by an FHA-approved appraiser, and any security or habitability issues must be resolved before your loan is allowed to close. The big difference in closing times between FHA refinances and purchase loans is likely due to the expedited process that the FHA offers to expedite refinances.
Average Closing Time for a VA Loan
It takes approximately 49 days to complete a VA mortgage. VA refinances are faster and take about 42 days to close on average.
VA loans usually take longer to close than conventional loans. This is due to the stricter underwriting requirements for VA loans and the fact that not all lenders guarantee VA loans internally. The big difference in closing times between VA refinances and purchase loans is likely due to the expedited process that VA refinances lines offer.
Only lenders with direct VA approval can obtain their own VA loans; Other lenders must submit your loan files directly to the Department of Veterans Affairs for review and approval, which significantly increases closing time.
How Have Closing Times Changed Over Time?
In February 2019, closing times were in a narrow range of 42 to 48 days on average for all loan types over the past 18 months. This indicates that despite seasonal market fluctuations and changing housing trends, it takes six to seven weeks to close on a mortgage.
Improvements in underwriting procedures, combined with a shift to digitized mortgages, have sped up closing times on average. However, while many online lenders offer expedited closing times, your experience can vary widely based on your financial profile, as well as the capabilities and capabilities of the lender you choose.
How Can I Get a Quick Home Loan Closing?
There are many steps you can take to close a loan as quickly as possible:
Start the loan process as soon as possible by getting pre-approved
Get pre-approved by your lender by providing your income, assets, and credit information. To issue a pre-approval letter, your lender will need to obtain your credit report, calculate your debt-to-debt ratio, and verify your available assets for a down payment.
Doing this in advance saves time once your offer is accepted and increases the likelihood that your loan will be approved. It’s a good idea to get pre-approved by multiple lenders at this time to ensure you get the best mortgage rate.
Respond quickly to all requests from lenders and provide complete documentation
By providing all documentation as quickly and completely as possible, you can help move the process forward. Many closings are often delayed because the borrower does not pay attention to emails or does not respond to calls.
It’s a good idea to respond quickly if the lender asks you to sign disclosures, return requested documents, or acknowledge urgent documents such as the closing disclosure so that the mandatory waiting periods can begin.
Choose a digitized mortgage process
Choosing a mortgage lender that offers a digital or online mortgage process can also help speed up the process by taking advantage of technology to prepare documents and disclosures.
Digitized mortgage lenders can complete electronic signatures and even apply for loans as directed by Fannie Mae or Freddie Mac. While it’s not guaranteed that other steps of the loan process will move as efficiently, a commitment to speeding up the process via technology indicates that the company can close your loan quickly.
What happens at a mortgage loan closing?
At closing, you will carefully review and sign all the legal documents required for the lender to issue a mortgage. This will transfer ownership of the property to you. The proceeds of the loan equal to the purchase price will also be distributed to the seller.
The closing documents for the buyer include:
- The promissory note, which commits you to repay the loan.
- The mortgage, which gives the lender the right to foreclose on the property if you don’t pay.
- Escrow Disclosure, which will detail the charges built into your monthly tax and insurance payment.
- A right-to-cancel-form, which allows you three business days to cancel the entire transaction.
- A generous stack of government-required disclosures, disclaimers, and documents to read and sign.
What you need to bring to the closing
Be sure to ask your lender representative and closing agent what you will need to provide at closing. At a minimum, you’ll need:
- Your personal identification, such as a driver’s license.
- The closing disclosure you received three days ago so that you can compare it to the documents you will sign.
- A receipt of the wire transfer for the funds you owe at closing.
What you’ll pay at closing
When you apply for a mortgage, this is all detailed in the loan estimate, as well as in the closing disclosure that will be available to you three days before closing. Expect to pay:
- Lender origination fees and third-party fees that have not yet been paid.
- A prorated portion of property taxes.
- Interest that will accrue before you start paying your mortgage.
- An amount that is applied to the homeowner’s insurance coverage.
- Title insurance premium.
- And maybe a portion of the HOA fees, if applicable, on your property.
So, you have overcome all the obstacles on your way to the closing table. Now you can finally start breathing. If you complete all the required steps and tasks and the necessary funds end up in escrow, your closing day should be short and enjoyable.
At the end of the day, you can move forward with the closing as quickly as possible by being prepared during the home sale and working with a top realtor to get things done.