When you’re buying a house, timing is everything.
Closing just a day late can cost you five figures of hard-earned cash. But don’t let that fact stop your homebuying goals before they start.
Instead, get proactive. Ask your lender upfront, “How fast can you close a loan?”
Your lender’s average mortgage closing time is one of the most important factors as you consider working with them.
What does it mean to “close on a home”?
Closing a loan — or closing on a house — refers to finalizing the sale. It’s when you sign the legal paperwork and pay your closing costs and down payment.
The closing must happen before you can officially take ownership of the home, which happens once the loan is funded a couple days after closing.
You’ll sign your loan documents at a closing appointment, which can take place at the title company, mortgage lender, or a real estate attorney’s office. Nowadays, closings have been known to happen at coffee shops and even fully online, depending on your lender and local real estate laws.
Expect your closing appointment to take up to a few hours.
Why does mortgage closing time matter?
There are several reasons why a lender’s average closing times matter. But they all come back to one hard truth: your hard-earned money’s on the line.
Here are just a few consequences of a loan not closing by the date in your sales contract:
- You can lose out on the home. If you don’t close by the date agreed upon in the sales contract, you’re in breach of contract and the seller may re-list the home or go with another buyer.
- You could lose out on your earnest money. If the mortgage closing gets delayed, you’ll forfeit any earnest money paid when you made your offer. And in a seller’s market when earnest money can reach $10,000 to $20,000 or more, this is a very big dea.
- Your mortgage rate could expire. Mortgage rates are usually locked in for somewhere between 30 and 90 days. If your loan doesn’t close before that lock period expires, you could end up with a higher interest rate than planned..
- You may owe penalties. Some sales contracts include buyer penalties for each day a closing is delayed. If your contact has this type of verbiage, you could owe the seller hefty fees for missing the mortgage closing date.
Closing times matter, to your home sale and your wallet. Before choosing a lender, it’s important to ask about their average closing times — specifically for your type of mortgage loan.
As you and your real estate agent write the sale contract, you want to include a closing date that’s realistic based on your lender’s turnaround times and the loan program you’re using.
Why you need to ask your mortgage lender about their closing times
As of April 2021, the average loan closing time for a home purchase is 49 days, according to the mortgage technology company Ellie Mae, though some lenders close loans much faster than that.
There are a lot of variables that go into closing, and your lender doesn’t control all of them. If you apply for a USDA loan, for instance, the government agency actually reviews your application before the lender can give full approval. How long it takes the USDA to respond is out of your lender’s hands.
But there are a lot of factors your lender does control, and you can find lenders who will get you to closing in weeks, not months.
The lender’s resources, staffing, and the number of loans they’re currently processing all impact how quickly they’re able to close your loan, so it’s very important you ask upfront about their closing times and processes.
A few key points to cover with your loan officer:
✓ What is the company’s average closing time?
✓ Does the company prioritize purchase transactions over refinances?
✓ Do they offer any closing guarantees?
✓ If they miss the closing date, will they extend your rate lock period?
✓ Will the lender compensate for earnest money losses if you lose the home because of a mortgage closing delay?
Here’s another reason your lender’s average mortgage closing time matters. A fast closing guarantee can give you a competitive edge. You’re not the only one who wants to move fast on a sale — sellers want to move quickly, too!
Make an offer with a lender that’s known in your local market for its fast closing times. The seller and their agent may choose your offer over others because they’re confident the sale will happen quickly, efficiently, and on time.
Who else is involved in the closing process?
Remember how we said there are a lot of variables that go into closing? That’s because it’s not just you, your lender, and the seller involved in the deal.
A number of third parties are involved, too, and delays on their end could delay your mortgage closing. A home appraiser, home inspector, and title company are also essential to the homebuying process, and each of them may find something that affects the timeline:
- Your FHA appraiser could find major property issues that need to be repaired before you can close
- Your title agent may discover liens or other conflicts in the property’s title search
- The home inspector could find defects that you want repaired or to be compensated for before moving into the home
Your lender probably won’t make any guarantees for delays caused by third parties. However, they may offer to extend the rate lock or provide compensation if you miss the mortgage closing because of their own issues.
It’s also smart to ask about their process for resolving third-party delays.
Is there anything I can do to speed up the closing process?
Actually, there is. Your loan officer may ask you for additional documents throughout the processing stage. This might include employment verification or more information about your finances.
The faster you provide this information, the quicker they can move on to the next step. If you take several days to respond each time they request new paperwork, you’re creating a bottleneck.
To avoid delays,respond immediately to requests. You may want to give the loan officer a few ways to reach you if they need something urgently so that you’re always making progress toward closing.
Mortgage closing FAQs
The average mortgage closing time for a home purchase is 49 days, though the averages are slightly longer for FHA purchase loans (52 days) and VA purchase loans (54 days), according to Ellie Mae. Conventional have the shortest average time to close, at 47 days for purchase loans.
But closing times vary widely by mortgage lender, and some companies can close loans in as little as a week in rush situations. Due to mandatory disclosure timing rules, it’s nearly impossible to close faster than about one business week.
“Clear to close” means your lender’s underwriting team has verified your financial information, the property meets all program safety and livability requirements, and there are no title conflicts.
You’ll get your closing disclosures at least three days before your assigned closing date. These documents will include all of the details and fees associated with your mortgage, so take your time reviewing them and let your lender know if you have questions or concerns ahead of your closing appointment.
There are many steps that occur between your offer and the closing date. Your home must be appraised and inspected, your financial documentation needs to be assessed and verified, the property’s title search must be conducted, and the loan must be processed. These steps involve several different parties to complete them, each stage can take days or even weeks.
Apply with confidence
Knowing a lender’s average closing time before choosing them to handle your mortgage loan is critical.
In some cases, choosing a quick-to-close lender may even help you win out against other bidders, so make sure to pick a lender that puts a high priority on timely closings.