How long does it take to close on a home mortgage?

A home in downtown Smyrna GA
Image by The Ken Cook via Flickr

Turn that around with another question, “how long does it take to get to work?” Yes it is that variable and those variations come from every aspect of the loan process so we must examine the major processes in closing a loan. By the end of this short article you should know how to help your loan close quickly and smoothly as possible. Just as the answer for one person getting to work on one particular day can be quite different for another person in another city mortgage closing times are subjective and cannot be stamped with a cookie cutter type guarantee.

With every loan the first step is the application. This step takes only a short time but if it is completed sloppily or with inaccurate answers to the questions there could be delays later in the process.  To make the process go quicker and more smoothly you should have your most recent pay stub and your bank account information, including your account numbers and balances, readily available. There are four pages to the application and if you have those items ready you should easily be able to complete an accurate application in less than thirty minutes.

Next is the pre-approval process which can take as little as 15 minutes if you are getting only an automated approval. Essentially the loan officer will “pull your credit” and import it back into the application software then digitally submit the entire application and credit to an automated underwriting engine (essentially a network based computer application). If they receive what is called an “approve eligible” (eligible to be approved) you will then have an automated underwriting pre-approval decision. The application along with all supporting documentation must later be submitted to a human underwriter to verify the “findings” delivered by the automated underwriter. Other scenarios can occur but those are beyond the scope of this article.

If you are refinancing or have already made an offer which has been accepted on a home purchase (never a good idea unless you have already been pre-approved) then all you need to do is sign the application package along with federal and state disclosures and perhaps some lender specific forms along with reviewing the federally mandated Good Faith Estimate (no signature required but you must review it). After this is provided, initially, there is a 7 day waiting period before the loan can be consummated. If the GFE has to be redisclosed due to significant changes in particular prices there is an additional 3 day mandatory waiting period.

During the mandated waiting period after the borrower has signed the “Intent to Proceed” which is an acceptance of the terms proposed on the GFE the loan officer should order the appraisal, title, proof of insurance, proof of income/employment verification, and any other verifications. You, the borrower, should be prepared to provide all of the following for each borrower even if you are not asked for it. Additionally the underwriter may ask for something not on this list: the last 1 month’s worth of pay stubs, the last two months of all bank statements all pages, up to three years of tax returns all schedules all pages, the name address and phone number for all of your employers over the last 2 years, the name address and phone number for all of your landlords over the last 2 years, the last 2 years of W2s from all jobs, copies of government issued identification, letters of explanation if you have applied for any credit in the last 90 days or so, and any other documents the loan officer asks for.

Sound like a lot? Remember, you are asking a complete stranger to buy a home for you and trust you to repay them a very small portion of the sales price every month. Be glad you are getting a loan at all in this economy!

All said if everything falls into place a good lender, like the author’s company, could conceivably close your loan in as few 10 days. However that is highly unlikely due to many reasons not limited to waiting on the fully executed sales agreement to return, any title/appraisal issues to be resolved, and possibly even for you, the borrower, to find all of your paperwork. Therefore the more accurate truth is it takes anywhere from 21 to 30 days to close most standard loans for the average buyer or home owner by most direct lenders. Mortgage brokers and banks may take a little longer. If you expect to close or have been told you can close in a shorter time prepare to be disappointed and be handed a fresh copy of the disclaimers from the lender who guaranteed you a shorter closing.. If your expectations are reasonable and the lender does their job you’ll close quickly and smoothly.

To wrap it all up if you have all of your documentation ready including the fully executed sales contract it is much more possible to close your loan quickly. It is not, however, recommended to find yourself in a position where if you do not close in 10 days something not so pleasant will occur in your life.