The time it takes to buy a home can be a long process. According to a December 2021 Bankrate.com article, the average time to close on a home with a conventional mortgage is about 51 days.
Having all documentation organized in advance and quickly responding to all lender questions will minimize the time between an accepted offer and successful closing.
Steps to a Successful Closing
1. Loan Pre-Approval
Before beginning a home search, securing pre-approval from a lender is an essential first step. Being pre-approved tells the buyer’s Realtor and prospective home sellers that the buyers are serious and qualified for the sales price. In addition, pre-approvals reduce the potential for a purchase offer to fail due to a contingency based on buyer financing.
The pre-approval application requires specific financial information. Prospective borrowers should expect to verify income, assets, credit history and submit recent tax returns. The process for pre-approval may take only three or four days, depending on the information provided.
2. Finding the Right Home
The pre-approval from a lender defines the price limit for which the borrower qualifies. Then, with the assistance of a knowledgeable and experienced real estate agent, the search will be for homes that fall within the target price range.
3. Making an Offer
When the number of homes for sale exceeds buyer demand, the market gives the buyer greater leverage over the seller. However, in a seller’s market, the demand for homes exceeds the supply, and buyers must compete for fewer properties available for sale.
4. Offer Acceptance and Contract
If the offer is accepted, the buyer will generally submit earnest money, a small percentage of the purchase price, to further demonstrate commitment to the deal. These funds are credited at closing and generally assigned to the buyer’s down payment.
5. Home Inspection
Usually, within ten days or so, a professional home inspector should conduct a detailed inspection and provide a complete report of any shortcomings or flaws in the home. In many instances, the seller may be required to make repairs before the closing or apply credits to the buyer.
Finalizing the underwriting process is the last step before final approval. At this point, the lender should have most of the information necessary to proceed with final approval. However, during this period, the lending officer will request further documentation to ensure the borrowers’ financial circumstances have not deteriorated during the process.
As part of the pre-closing process, the lender will order a professional appraisal to ensure that the home is not worth less than the original loan.
Closing involves dozens of documents to cover all aspects of ownership transfer. This final step will take about two hours or so.
Buying a home can be complicated and can be stressful for the unprepared. Talk with a lender and a reputable real estate agent before starting the process to help navigate the complexities of homebuying.