Once you find your dream house and your purchase offer is accepted, you need to get through one more step before you move in: mortgage closing. The time it takes to close on a home will vary from one person to the next. When everything goes right, loan closings can be completed in as little as 21 to 28 days, says Atlanta-based real estate agent Bruce Ailion. Currently, Ellie Mae reports that the average closing time for home loans is 44 days.
“Factors like the type of home loan or last-minute changes and requests will affect the amount of time it takes before a house becomes yours. But typically, a lender can close on a mortgage in about a month,” states Andrina Valdes, the division president at Cornerstone Home Lending, Inc. in San Antonio, TX.
However, not everything always goes according to plan. Issues can arise that can keep you from settling into your new place for weeks and sometimes months longer than you expected. Here are some of the most common snafus that can delay the mortgage closing process.
1. Expensive purchases for your new home
A word of advice: Don’t make any pricey purchases with your credit card before closing on your house. "This could actually put buyers out of qualifying for their new home,” says Texas real estate agent Jeff Peterson.
After an offer on a house is accepted, some people may be tempted to buy a new sofa, dining set, or another expensive piece of furniture. But real estate experts warn that this could be disastrous. Right before closing, the mortgage lender will pull the buyer’s credit to make sure nothing has changed. A big purchase will show up, which could become an issue, because it means that the buyer is taking on more debt.
2. Death of the original homeowner
If there has been a death associated with the desired property, the home may need to go through probate court first to authenticate the former owner’s last will and testament. “If that’s the case, your closing will be delayed, and there’s not much you can do about it,” says Jim Lorio, a Florida real estate investor. In some states, probate can take anywhere from a few months to a few years.
3. Homeowners association issues
If the previous homeowner has outstanding homeowner association (HOA) fees or fines, this could cause delays. In some cases, you may be able to negotiate those fees with the seller; otherwise, you will be responsible for paying them.
4. Verification issues
In some instances, the borrower’s landlord, mortgage company, employer, or source of down payment may not be willing to provide verification in a timely manner. Their failure to move quickly can slow you down.
5. Down payment issues
There are times when the lender may require the home buyer to put more money down; this may take time, especially if the buyer lacks the extra funding.
6. Lender may need additional information
In some cases, additional info may be requested late in the process. Other times, the lender may lose a document that will need to be obtained again.
7. Scheduling problems
One party—whether the closing agent, attorney, title company representative, lender, buyer, or seller—may not be available to meet on the closing day, which can push timelines back.
8. Buyer delays
If a buyer is self-employed, sometimes additional documents are required. If the buyer has multiple sources of income, this may need to be documented and verified as well. If the buyer is getting a down payment from an unconventional source or a gift, this could also slow down the process.
9. Flood insurance requirement
If your new home is in a flood zone, you may need to get flood insurance, which may require a benchmark survey. In some markets, this might take three weeks. Then, it must be reviewed by the mortgage underwriter—aka the person who approves your loan. Flood insurance, and even homeowner’s insurance, can also sometimes be tough to get, depending on your past history with claims, credit, and location.
10. Appraisal disparities
Before a mortgage is ever approved, the bank must first appraise the home. If the appraisal comes in low, it may take some time to renegotiate the asking price of the home.
11. Title issues
In some cases, there may be a tax lien against the property that needs to be resolved first, in order to move forward with the closing process. Other times, the title may have the incorrect signature or attestation.
12. Property damage
If there is any type of damage to the property, the lender may require repairs prior to closing.
13. Contract disagreements
Sometimes the seller may not agree to the buyer’s contract requests (like agreeing to include the entire contents of the home in the deal). This can kill the transaction or require further negotiation between the agents and other parties involved.
If a homeowner is in foreclosure, it can take up to 10 days to get a payoff from the mortgage company, which often includes legal fees.