A house is a long-time dream for many. Buying a house can be a process full of uncertainty and excitement. Before taking this step, people of course compare different homes that cater to their needs and wants in a house and neighborhood.
Looking for the right house for a family demands a lot of considerations. Sometimes, when a person finds the perfect home, they get in the middle of a bidding war with other buyers.
Followign this bidding war, the next and signifcant process is closing on the house. Today, we will explore the time and resources a person needs to successfully close on a house.
How Long Does Closing a House take?
Closing usually takes thirty (30) to forty-five (45) days in a normal process. It may be different from the kind of loan; however, the variation isn’t far off.
The thirty-day closing process includes some prerequisites during the evaluation of the homebuyer’s financial readiness. This consists of the appraisal and inspection of the home.
The Standard Mortgage Loan usually lasts for 47 days (on average). On the other hand, the FHA loans take an average of 52 days to finalize.
Regardless of the loans, it has to be well-organized and clearly communicated between those involved.
Clear communication and careful organization between the lender, seller, and buyer can speed up closing the house. It saves money and gives you or the buyer that much-needed sense of relief.
Expectations on Closing Day
The process usually takes as short as one month but can be more than that. The closing is pretty quick, about one to two hours. You need to prepare everything and certify the purchase.
Certifying the purchase is the final step in acquiring a house. Take note that the appointment can take longer if the buyer is not prepared beforehand.
It is essential to bring a personal identification (driver’s license or passport) and extra copies of their Closing disclosure. Also, a certified cashier’s check is vital to have that will cover the closing expenses.
Other than these, there are some tasks a person need to complete the process:
All the legal documents must have the buyer’s signature on the closing date. Keep in mind that it is crucial to read everything before signing any form. This ensures that the house terms are well understood and no part of the information is omitted.
The following are the legal documents needed on closing day:
- Promissory note – Promissory notes include the loan’s financial terms. It also serves to be the agreement that a person will repay the loan in the total amount.
- Mortgage note – Just like a promissory note, a mortgage note summarizes the mortgage terms. It includes the loan total and down payment.
- Escrow Disclosure – Escrow Disclosure documents provide the details about their escrow account. It also entails the expected cost that the buyer will pay every month, including the insurance fees and taxes.
- Deed of Trust – Deed of trust or security investment is an agreement that allows the lender to foreclose or sell the property once the buyer stops paying them.
Paying the Closing costs
The closing costs are the fees that a buyer owes to the loan serviced by the lender. For most homebuyers, closing costs need to be paid during the meeting.
The amount a buyer ends up paying in closing fees may differ. However, these are the things a buyer can expect included in the closing disclosure:
- Closing fees because of the meeting
- Application fees in processing the loan.
- Loan origination fees for processing the buyer’s loan application.
- Fees for Homeowners Insurance (one year)
- Coverage for Title Insurance
- Home Inspection fees
Lastly, the meeting will end when the home’s title is successfully transferred under the buyer’s name. Once the title is transferred to the buyer’s name, you become the official homeowner of the property.
The Step-by-Step Process of House Closing
Closing a house has its process. There are stages that a buyer will go through in the process of house closing.
Step 1. One-day Application
An application like this usually takes one day. You can do this together with the pre-approval process.
Make sure that as a buyer you complete and check the application accurately. Errors and omissions create delays in the process.
The buyer needs to list their name, address, income, and social security number. They also need the estimated value plus the sum amount they’ll be requesting in their mortgage loan.
Step 2. One week Disclosure
The lender will process the one-week disclosure. It will take a day or two for the lender to complete everything.
The lender then supplies the loan’s terms. It includes the fees, expected monthly payments, and any costs made for closing the house.
Step 3. One-week Documentation
Documentation will only take a few days if the buyer organizes and prepares the details needed by the lender. The lender will then request the buyer to document their assets and total income.
It is important to have clear communication between the buyer and the lender. It is to know the things they need from each other, and it will speed the process up.
Step 4. One to Two weeks of Appraisal
The lender will require a house appraisal. It’ll take only one to two weeks. “Appraisal” calls for outside experts to check and identify the value of the house.
Take note that appraisal is different from a home inspection.
Step 5. One to Three days of Underwriting
The underwriters will check and evaluate the buyer’s documentation to see if they meet all requirements.
Step 6. One to Two Weeks of Conditional Approval.
There are times that they ask for more documentation, even when the underwriters already evaluated all of the buyer’s documents. The conditional approval stage then commences.
That’s why it is essential to communicate with the lender, and preparing the documents will make the process faster.
Step 7. Three days of “Cleared to Close.”
You’ll be given a three-day waiting period before they can return their signature after they receive their final clearance. It also includes the last disclosure of terms.
This is when buyers review their terms and ask an expert for advice if they need it.
Step 8. One day of “Funding and Closing.”
Finally, a final review process happens after signing. After this, the buyer’s mortgage is formally recorded with their county.
Why Does Closing Get Delayed?
There are a lot of reasons that can cause delays during the closing day. However, there are common reasons that can cause the uncertainty that a buyer can prevent from happening.
Most of the expected delays happen while the appraisal is ongoing. The official appraiser will be performing the buyer’s behalf.
Appraisals can help the buyers to know the worth of the house. If the buyer’s Appraisal is below the sale price, the lender can choose to hold off the closing process.
The lender will take their time to ensure that they will receive the amount they’re owed if foreclosing happens. This means that the seller needs to lower down the actual price.
Or the bank will ask for a second opinion from a second appraiser. Either way can result in a longer delay and will get the buyer’s closing timeline.
Another reason that can cause delays is issued on the buyer’s end. The following issues include:
- Unpaid debts
- Issues in the buyer’s credit report
- Incomplete loan application
- When a buyer fails to send in the downpayment in the checking or savings account, it doesn’t have enough time to trace the money.
These issues can be prevented if the buyer consults their real estate agents and lender beforehand.
There are times that the issue is not about the lender or buyer. It is something that the buyer can control.
- Sometimes the issues are with the current owner of the property. These includes:
- Some repairs are not repaired but were agreed to be done before the new homeowner moved in. The said repairs can cause a delay if the final walkthrough reveals a problem.
- There are complications revealed when searching the title.
- The Property’s Liens.
Should I Close the House Quickly?
A considerable advantage is saving you the hassle and stress of communicating and interacting with all people involved in the process.
Another advantage is it can lower the moving costs for the buyer. Also, extension fees for mortgage rate locks can be avoided if the closing ended quickly.
Mortgage Rate Locks gives buyers a locked mortgage rate. They can sit back and forget the rates if the closing ends faster.
On the other hand, if the buyer exceeds the mortgage lock term, they may pay a percentage fee to the lender.
The most valuable thing about buying a house is choosing a trustworthy lender. The buyer must be comfortable with the lender that can communicate with them.
Being able to communicate with a lender frequently will make the buyer feel secure with the house. It will also save them money, time, and stress.
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