Closing on a house is an exciting milestone in anyone's life. However, it can also be a complex process that requires careful attention to detail. In this blog post, we'll answer the popular question, “How long does it take to close on a house?,” and I'll walk you through the essential steps involved in closing on a house, from negotiating the contract to post-close issues to watch out for.
I initially wrote a post on this way back in 2016 for the National Association of Realtors as an influencer. It is WILD to me that now, seven years later (as of publication) I'm a licensed real estate professional and a member of the NAR. I've also closed on several different homes now (both as an agent, an investor, and a few during my divorce.) That's just me giving a very long-winded explanation of why I feel very confident I can give a detailed overview of the steps involved when closing on a home. Okay, let's get started.
First, how long does it take to close on a house?
The answer “How long does it take to close on a house” varies by state and if you're paying with cash or using a mortgage loan. Because a lender is not involved, closing for cash purchases can take place in as little as ten days. When using a mortgage loan, however, the standard closing for a house takes between 30-60 days. This is based on my own experience as a real estate agent here in Georgia, and also based on averages and data from CNBC.
As for the day of the closing appointment, factor in 1-2 hours for the official closing to sign all the paperwork. If you work during the day, I'd take a half day off of work, to attend the closing, get the keys to your place (if you're taking possession that day) and maybe do something small and fun to celebrate before heading back into the office.
What are the steps to closing on a home?
That 30-60-day window for house closings is an estimate. This is because it isn't an exact science on “how long does it take to close on a house?” Every lender, individual homeowner, real estate broker, and closing attorney is different. Broadly, here are the steps to closing on a house that you can expect to complete within that timeframe.
- Contract Negotiation
- Due Diligence
- Closing Day
1. Negotiating the Contract
The first step in closing on a house is negotiating the contract. This involves reaching an agreement with the seller on the terms and conditions of the sale. Key elements to consider during this stage include the purchase price, contingencies, and any additional terms you may want to include. Once you come to terms of the agreement, you'll both sign and it will be considered binding. Earnest money (typically around 1% of the home's purchase price) will be held by either your real estate broker or the closing attorney.
2. Due Diligence
Once the contract is signed, it's time to conduct due diligence on the home. This step involves thoroughly inspecting the property to identify any potential issues or repairs that need to be addressed before closing. It's advisable to hire a professional home inspector who can provide a detailed report on the condition of the house, including its structural integrity, electrical systems, plumbing, and more.
You should also make every effort to attend the closing to both witness inspection and ask any questions. It could be helpful to know where the water shutoff valve, breaker box, and other home systems are and how to access them prior to closing. In any event, it will make living in the home easier. Attending the inspection also gives you the opportunity to spend more time in the home, get to know it better, and see for yourself if this is really a purchase you'd like to go through with.
This process is happening at the same time as your due diligence, but it's where the bank begins to study your financials to see if you qualify for the loan. During mortgage underwriting, the lender evaluates the borrower's financial information and assesses their creditworthiness to determine if they qualify for a mortgage loan. This process involves reviewing the borrower's income, employment history, credit score, debt-to-income ratio, and other relevant factors. The lender may also request additional documentation, such as bank statements, tax returns, and proof of assets.
Your lender may also require a home appraisal. Once all of these items are in the lender's possession, the underwriter carefully analyzes all the information to ensure that the borrower meets the lender's guidelines and can repay the loan. The good news is that if the underwriter approves the mortgage application, the borrower can move forward with the closing process.
Steps for Arranging the Closing
After completing due diligence, it's time to move forward with arranging the closing. This involves coordinating with various parties, such as your lender, title company, closing attorney, and real estate agent. Your lender will work on finalizing your mortgage loan, while the title company will ensure that the property's title is clear and transferable. It's important to stay in close communication with all parties involved to ensure a smooth closing process.
Typically, the closing attorney will take the lead on scheduling the day and time of closing once the loan is through due diligence and you have received your loan estimate documents. You should then receive what's commonly known as the “closing disclosure,” which is a sheet that details everything about your loan – interest rate, term, and fees, so you'll know in advance of closing how much you'll need to bring for closing costs.
Also FYI – A closing disclosure is required by law to be presented to you at least three days in advance of your closing!
The big day! You'll attend a final walk-through before the closing appointment to ensure the home is in the condition you believe it to be before it becomes officially yours. You'll bring any closing costs with you to the closing attorney's office.
Closing Advice and Tips
- Don't make any major purchases during underwriting, as this can change your credit score and cause the lender to need to start underwriting all over again. This will delay closing on your home!
- Review all documents carefully before signing. Double-check the spelling of your name! (This is important and mistakes happen far too often.)
- Attend the final walkthrough to ensure the property is in the agreed-upon condition.
- Have a certified check or wire transfer ready for the closing costs.
- Consider purchasing title insurance to protect your investment.
- Keep copies of all closing documents for future reference.
Potential Post-Close Issues
While closing on a house is a significant milestone, post-close issues can happen, although they are rare. These can include unexpected repairs, disputes over property boundaries, or issues with the title. It's wise to have a contingency plan in place (including title insurance!) and set aside some funds for any unforeseen expenses that may arise after closing.
How long does it take to close on a house? – The answer is, it depends.
Closing on a house is a multi-step process that requires careful attention to detail. Remember, it's always a good idea to seek professional advice and guidance throughout the process if you have questions; whether it is with your real estate agent, lender, or closing attorney. Reaching out for help is always a good way to ensure a successful and stress-free closing.
Lauren Bowling is the creator of Financial Best Life. Writing about money since 2012 (formerly as L Bee and the Money Tree), Bowling is an award-winning blogger and money and real estate expert whose advice has been featured on CNBC, Forbes, CNNMoney, Elite Daily, Business Insider, Redbook, and Woman’s Day Magazine and more. After selling the site to a division of The Motley Fool in 2019, Bowling is now back as the owner and primary voice behind FBL and is excited to continue educating elder millennials everywhere about how to afford their best life.