Why it takes so long to close a home loan
When you’ve found the perfect house and the seller has accepted your offer, waiting to complete the home loan closing process - which can take around 40 days - can feel torturous.
While the process is not fast to somebody anxiously awaiting the keys to their new home, understanding why it takes this amount of time and how you as the borrower can speed it up can help.
Appraisal
The company you’ve chosen for your mortgage will ask an independent third-party to conduct an appraisal on the property you want to buy. This process from request to appraisal can take a few days, as the appraiser will do an onsite inspection to determine if the amount you’ve agreed to pay for it matches its value. If the appraisal comes in under the contract value of the home, you may need to renegotiate with the seller, appeal the appraisal with the lender or give the seller cash for the difference between the loan and the contract sale price of the house - each of these adds additional days to the close process.
Title Search
The lender also performs a title search on the home to be sure there are no liens or judgements on the property, which would prohibit the title from being transferred to the buyer. This process can also take a few days, more if it is discovered that the title is not ‘clear.’
Underwriting
When your home loan application has been completed and your package prepared by the loan processor, it then moves to the underwriter. According to PennyMac, the mortgage underwriter is responsible for analyzing your risk to determine if the terms of your loan are acceptable. The underwriter will investigate to make sure your application and documentation are truthful and they will double-check you have described your finances accurately.
During this process, the underwriter is checking all the documentation you’ve provided up to this point to be sure that you can afford the loan for which you are being considered. They are also contacting other parties, such as your employer, to verify that what you’ve submitted is true. As a result, the underwriter may ask you to provide additional information if something is incomplete or they need clarification. It’s important during this time that you are timely and thorough with your responses to any questions or needed documentation so as to not delay the process any longer.
Documentation
There are standard documents that your loan processor will need to complete your home loan package. Some of these documents include:
- Copies of driver’s licenses and social security cards
- Two months of paycheck stubs
- Two years of W2s
- Two years of tax returns
- Two months of bank and retirement account statements
- Documentation to source any recent cash deposits into your bank accounts
- Proof of homeowners insurance and contact information
You may be asked for other documentation, but having these documents at the ready when they are requested will help speed up the process.
Getting a home loan can seem like it takes a long time, but with a little patience, you’ll find your dream home waiting at the end.
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