Buying a new home can be an exciting — and lengthy process. But just how long is it? Learn more about the closing process, how long it takes, and how to speed it up so that you can start enjoying your new home sooner.
What Need To Happen Before Closing on a House?
A lot needs to happen before you even get to the closing table during the home buying process. Here are some things to add to your pre-closing checklist so that you can close as soon as possible:
1. Title Search
Before you can close on your home, a title search will be performed by a title company. A title search is performed to ensure that the seller is the rightful legal owner of the property with the right to sell it. A title search is also performed to ensure that there are no unpaid debts or liens associated with the property.
Since debts and liens are attached to the property itself rather than a specific owner, the new owner may become responsible for them without their knowledge. The good news is that title companies are good at their jobs and are able to find most title issues.
In the event that an issue somehow slips through the cracks and goes undiscovered by the title company, you can also pay for title insurance that will cover the costs of any issues that may come up down the line.
2. Home Appraisal
A vast majority of lenders will require a home appraisal before closing to make sure that they’re not giving you more than the property is worth. This is risk management on their part since their number one goal is to get their money back. The appraisal is also beneficial to the buyer and can help them avoid overpaying for a home.
During the appraisal process, an appraiser will come to the property to review its location, features, and overall condition. From there, they will find comparable properties that have recently been sold in the immediate area. Based on the sales prices of these comparable properties, the appraiser will be able to determine the value of the property.
3. Home Inspection
If possible, it’s a good idea to get a home inspection done before you close on the home. With a home inspection, an inspector will come to the property and thoroughly inspect it — inside and out. They check to make sure that all systems are working properly and that the house is structurally sound.
Even if you don’t want to make the sale contingent upon the inspection, you could still benefit from knowing what you’re getting yourself into. After all, knowledge is power.
4. Satisfy Contingencies
If your offer was accepted with any contingencies, these need to be satisfied before closing. For example, if the seller agreed to have the roof replaced, you need to make sure that this is done (with receipts) prior to closing.
Or, for example, the purchase of your new home was contingent upon the sale of your current home. This also needs to happen before you can close on the new home.
5. Final Walk-Through
Right before closing, you need to do a final walk-through of the property to make sure that everything is as it should be. When you do the final walk-through, the seller should have already moved out.
This gives you the opportunity to see the property in its entirety. For example, you may see damaged walls that were hidden by paintings or stained carpets that were hidden by rugs.
The final walk-through also gives you the opportunity to make sure that the sellers left what they were supposed to leave and took what they were supposed to take. For instance, they are supposed to leave fixtures like ceiling fans, blinds, and appliances. However, they are supposed to take furniture, curtains, and other decorations unless otherwise agreed upon.
If any issues are discovered during the final walk-through, they need to be resolved before you can close.
What Happens During Closing?
Once you’ve made it through all of the above, you’re ready for closing day. But what actually happens during closing?
1. Documents Are Signed
Be prepared to sign a lot of documents on your closing date. However, don’t just start signing right away — make sure to carefully review the documents before you sign them.
Some of the documents you need to sign on closing day are the closing disclosure, the mortgage promissory note, the deed of trust, the certificate of occupancy, the escrow disclosure, and the proof of homeowner’s insurance. So bring a nice pen with you; you’re going to need it.
2. Closing Costs Are Paid
You also need to be prepared to pay your closing costs. Closing costs cover the processing of your loan application, including mortgage origination fees, underwriting fees, credit report fees, and appraisal fees. If you’re using points to receive a lower interest rate, you need to pay these as well.
You may also be required to pay into your escrow account to cover the costs of future homeowner’s insurance and property taxes. Finally, you need to be prepared to cover the cost of your down payment.
With so many different costs involved in the closing process, it’s important to understand your financial obligations ahead of time so that you can come prepared with a certified check or cashier’s check on the day of closing.
3. Ownership Is Transferred
After the paperwork has been signed and the closing costs have been paid, ownership of the house is finally transferred from the seller to the buyer. This transfer is then reflected in the city or county’s public record system. Now it’s time to finally move in and start enjoying your new home.
How Long Does It Take to Close on a House?
Based on what you now know about the closing process, it clearly can’t happen overnight. But just how long does it take? In most cases, you can expect closing to take about 30 days. This provides plenty of time for the inspection, appraisal, title search, and loan underwriting to be completed.
But if you’re on a tight timeline and need to close quickly, is that possible? It is with the right lender. Lenders like Vaster make it possible for you to close on a real estate transaction in less than 30 days. That way, you can make a more competitive offer in such a cut-throat real estate market and quickly get the keys to your new home.
Issues That Could Cause a Closing Delay
While it is possible to expedite closing, there are some issues that could delay the closing process, namely financial issues, property issues, and title issues.
1. Issues With Financing
First of all, issues with financing could delay the closing process. Even if you’re pre-approved for a loan, the lender still has to verify all the information you presented on your initial application during the underwriting process. Most lenders have strict qualification requirements for your credit score and your debt-to-income ratio (DTI).
So if your financial situation has changed since you first received your pre-approval, this could negatively impact the underwriting process and your ability to secure the loan. For example, say that you missed a credit card payment that negatively impacted your credit score and caused it to drop below the lender’s minimum threshold. Or say that you bought a new car using an auto loan that increased your DTI above the lender’s threshold.
As a result, you may not be able to receive final approval for your loan — putting closing at risk.
2. Issues With the House
Issues with the house itself could also delay the closing process. For example, most lenders require that you get the home appraised to make sure that it’s worth what they’re loaning you. If the appraisal comes back lower than the amount you’re paying for the home, you’re required to make up the difference on your own. In some cases, this could mean having to pay thousands of dollars — something that not every buyer is willing or able to do.
On the other hand, most buyers choose to undergo a home inspection to make sure that the home doesn’t have any major issues. If your offer was submitted with an inspection contingency, it means that the finalization of the deal is based on a favorable inspection.
If any issues are discovered during the inspection, you may ask the seller to make repairs or provide you with a credit to complete the repairs yourself. If the issues are severe enough, you may choose to walk away from the deal completely.
3. Issues With the Title
Finally, issues with the title could delay the home closing process. As you now know, the title search is an important component of the closing process designed to ensure that the house is being sold with a clean title. If the title comes back “dirty” with a lien, it will need to be addressed before you can close.
In most cases, the seller will simply pay the lien to clear the title, but this can take time and delay the closing.
Tips to Ensure a Quick Closing Process
If you want to expedite the closing process and avoid any issues along the way, here are some tips to keep in mind:
Don’t change jobs: Changing your job during the homebuying process can be a huge issue that can derail the entire process. So if you don’t like your job, try to tough it out until after you’ve closed.
Don’t take out new loans: Taking out new loans during the homebuying process can affect your credit score and your DTI — potentially disqualifying you for a loan that you previously qualified for.
Keep your paperwork in order: Buying a house involves a lot of paperwork that can be tedious and time-consuming. To ensure a speedy process, keep your paperwork in order and provide any requested documents to your lender in a timely manner.
Get pre-approved: Getting pre-approved can expedite the closing process since the lender will already have a bulk of your information. They just have to verify it instead of starting from scratch.
Close on Your House Quickly With Vaster Capital
Vaster is a private lender that offers unique loan products, flexible qualification requirements, and quick closing time frames. All of these factors combined make us a great lending partner if you want to buy a home as soon as possible. So get the process started today by filling out an application.