In the age of next-hour delivery, we’ve all grown accustomed to transactions that happen in a few clicks. Buying a house, however, requires much more time, more signatures and more waiting. Understanding the homebuying process can help give you a realistic idea of how long it takes to buy a house and get the keys to your new home.© John Coletti/Getty Images Home with green landscaping
The average time to close a loan on a home purchase was 56 days as of December 2020, according to mortgage data firm Ellie Mae. The real estate market has been very busy, with interest rates hovering near 3 percent and many considering new options in the wake of the pandemic.
As you look for a new place to call home, here’s a rundown of what you’ll need to do:
- 1. Get preapproved
- 2. Find a home
- 3. Make an offer
- 4. Go to contract and put down earnest money
- 5. Schedule a home inspection
- 6. Wait out the closing process
- 7. Sign closing documents and get keys
1. Get preapproved
If you’ve been asking yourself “How long does it take to buy a house?”, one of the ways to keep that timeline short is to get preapproved for a mortgage. Getting preapproved shows that you’re serious about buying a house and confirms how much you can borrow. A mortgage lender will typically ask for information about your assets, income and credit history to make their assessment of what they’re willing to loan you for a home.
If preapproved, you’ll receive a loan estimate within three business days after applying for a mortgage that outlines your loan amount, interest rate and other loan details. It’s important to compare options, too. The Consumer Financial Protection Bureau recommends getting loan estimates from at least three different lenders.
Before you begin the preapproval process, you need to consider what you’ll look like in the eyes of a lender. Do you have any errors on your credit report? Are you carrying a hefty balance on a credit card? Think about the preapproval process as a chance to show off your best self. Lenders need to feel confident that you will be a responsible borrower.
Here’s a general timeline of what you’ll need to prepare before submitting paperwork for a mortgage preapproval:
- At least 6 months before – You’ll want to start saving up for a down payment (if you haven’t already) so you can show a lender you have the means to purchase a home. Also, try to get a broad picture of your financial situation by checking your credit report and score. Lenders will look at your credit history (and, by extension, your credit score) to see how creditworthy you are. Understanding what’s in your report now will give you a chance to raise your credit score if needed. Then, when it comes time to get preapproved, you have a better chance of landing a better rate.
- 3-5 months before – During this time, avoid taking out any new loans or making other major changes like switching jobs. Doing so could affect your eligibility for a loan. Lenders look at your debt-to-income, or DTI, ratio, for example, to see whether you can afford to manage your monthly payments. You’ll want to keep the status quo in your finances, income and job situation to avoid delays in your loan approval.
- 1-2 months before – This is a good time to figure out what paperwork you’ll need to submit for a preapproval. Documents typically include recent paystubs, two years of federal tax returns and two months’ worth of bank statements.
2. Find a home
With preapproval in hand, it’s on to the actual buying process – or, at least, the browsing process. Once you’re preapproved for a mortgage, you can start looking for a house since you know how much house you can afford. At this stage in the process, you can work with a real estate agent and attend open houses.
3. Make an offer
Once you’ve found the house you want to buy, your real estate agent will help you put in an offer. Your agent will help you make an offer that’s competitive, aligned with home prices in your area and reflects your best interest. The offer will also include contingencies, which help protect you if you end up needing to back out of the offer.
Depending on your market, your agent might also recommend you write a personal letter to the seller stating your interest in the home. This letter will be packaged with your offer.
Note that if you’re lucky enough to be able to make an all-cash offer, you can reduce your time to close. Without a need to secure financing, you won’t have to deal with back-and-forth with a financial institution. However, even all-cash transactions require some waiting as the seller works out all the details and paperwork, so keep that in mind.
4. Go to contract and put down earnest money
If your offer is accepted, you’ll go to contract, and you’ll need to make an earnest money deposit, which is an amount of money you put down “in good faith” to assure the seller you’re serious about the purchase. Think of this as another signal that you’re committed to doing all the work ahead toward actually closing on the house.
5. Schedule a home inspection
If your offer is accepted, the next step is for you to schedule a home inspection. Depending on your state’s laws, a home inspection typically needs to be completed within 10 days after you sign a purchase agreement.
If any major concerns crop up after the home inspection, it could take more time to negotiate repairs or seller credits, however.
“Where I live, many homes still have septic tanks that need to be tested prior to a house sale,” says Jennifer Mattson, a real estate agent with the Mike Quail Home Selling Team with eXp Realty in Massachusetts. “I had one home where a new tank needed to be installed, and it delayed the closing by three additional weeks.”
6. Wait out the closing process
At this point in the process, you can expect to do some waiting as your lender moves the loan into underwriting. In this time, you may need to submit additional documentation for your lender to clear your loan to close, and the lender will order an appraisal to assess the home’s value.
Depending on the type of loan you take out, it could take slightly longer because of the types of assessments and paperwork needed.
“Although the buyer may already be preapproved for financing, once an offer is accepted on a property, the home is then assessed to see if it can be financed,” explains Mattson. “The lender needs to perform a series of steps to ensure this is a good risk for them.”
For example, an FHA purchase loan (61 days to close, according to the latest Ellie Mae numbers) or VA purchase loan (60 days to close) can take a few extra days to get final approval because of the additional documentation that’s needed.
If there have been major changes to your financial situation since you were preapproved, your loan might be delayed as well.
Once your mortgage is approved, your lender will give you a copy of your closing disclosure at least three business days before the closing date. The closing disclosure lists all of the loan details, fees and terms, as well as what you’ll need to pay in closing costs to finalize the purchase.
7. Sign closing documents and get keys
Finally, after all that work, closing day will arrive, and you will need to sign a small mountain of paperwork. You’ll also need to pay closing costs if you didn’t opt to roll those expenses into the loan. You will likely need to pay with a cashier’s check, as personal checks are typically not allowed.
How long does this final step take? It varies, but you should plan on spending at least two hours dealing with all the documents.
How to avoid delays when you buy a house
A good portion of sales that go to contract encounter delays. There are a wide range of potential issues that can create stumbling blocks, according to the National Association of Realtors (NAR), including:
- The buyer has trouble securing financing.
- The appraisal report comes back with a value that doesn’t match the loan terms.
- The home inspection report identifies the need for serious repairs.
- There are issues with the title/deed.
- There are issues with hazard and flood insurance.
- The buyer loses his or her job.
The No. 1 reason for delays is on the buyer end with those financing challenges. In fact, NAR reports 26 percent of delays were due to financing troubles.
To keep the process on track, treat communications from your lender as a top priority. If your lender requests additional documentation of your income or employment, respond as quickly as possible.
One last simple rule to help make the process as pain-free as possible: The earlier you get a head start on ironing out your finances and securing a preapproval, the more likely you’ll have a relatively smooth and quick transaction.