Some things, as they say, they don’t teach in school—especially when it comes to personal finance. Of course, that’s what this website is all about. Think about the first time you had to do your own taxes. Or figure out a proper investment plan. Or decide between term insurance and whole life insurance. Maybe you haven’t even encountered some of those milestones as of yet…but you will. And then, there’s the so-called American Dream: buying and closing on a house.
In a future column, I’ll explore a surely controversial point: Some experts now insist that buying a home is a bad investment, even if it’s a great quality-of-life decision. But for now, I’ll probe a topic that gives me the shakes just thinking about it: the home closing process.
I closed on my Chicago house in 2001, and I remember that it seemed to take forever. Between the inspections, the loan approvals, the back-and forth with the seller and my real estate agent, and a whole lot of hand wringing about somehow blowing the deal, it was nerve racking. Even the final legal meeting at a posh Loop office was no less comforting; I recall signing my name close to three dozen times, each time wondering what I’d just done. Was I signing my life away?
Hardly. And I can tell you this from experience: Closing on a house can be smooth and hassle free, even in these times when banks have decided to get tough on hard-working people like you and me. (Funny, I thought the banks themselves made the biggest mistakes of all during the mortgage-backed securities crisis. For a primer on that, check out this episode of “This American Life,” which describes how bankers making bad loans nearly brought down the global finance system.)
So how long does it take to close on a house? What is involved? And what happens at a closing? Remember that with almost any variable in your housing hunt, the answers vary based on the region, market conditions and unforeseen circumstances. Superstorm Sandy, for example, delayed thousands of home closings along the East Coast for weeks.
To get a bead on current home closing timeframes, I went to housing experts and asked them point blank. Here’s what they had to say, along with the best advice they could offer:
The timeline for closing on a house
“The timeframe to close on a new home can vary from 30 to 60 days with an average of 45 days,” says Erik Coffin, CEO of Gotham Capital Management in West Hollywood, Calif. “However, a multitude of variables can expedite or impede this process. Besides making an all-cash transaction, buyers who have received loan pre-approval are in a better position to close sooner.”
So if it’s a nightmare scenario you fear, make sure your bank paperwork is in order before you close.
“From a borrower’s perspective, it’s important to understand the mortgage process of today,” says Nanette Graviet, mortgage sales manager of the Mountain America Credit Union in West Jordan, Utah. “It’s much different than five years ago. You can’t just sign your name, show a pay stub and get a mortgage. There are more requirements and documents to satisfy the loan process. Making sure you have all of your tax returns, W-2s, pay statements, bank statements, and so on up front and ready to go will greatly reduce stress and help move the process along.”
To get a better sense of what the closing timeframe looks like up close, we also tapped Peter Grabel, a mortgage executive with Luxury Mortgage Corp. in Stamford, Conn. He gives the figure of 30 business days, or about 42 calendar days, as a realistic target for closing on a house. Some milestones that you can expect to hit along the way, Grabel says, include the following:
Day 1 Accepted offer; price confirmed
Day 2 Loan Application & disclosure sent to borrower for review
Day 3 Home inspection
Day 5 Contract sent from sellers attorney to buyer’s attorney for review
Day 7 Contract issues resolved, contract signed by all parties, 10 % deposit placed in escrow
Day 17 Loan Submitted to underwriting
Day 22 Receive Loan Commitment (five-day turn time)
Day 27 Attorneys schedule closing date (typically at least 3 days out)
Day 30 Walk through with Realtor and closing
If you’ve heard horror stories about closing on a house, here’s a dose of welcome reality that should provide comfort: The same common obstacles that block other major objectives in our financial lives (paperwork snafus or home repair issues, for example) can delay home closings as well.
So take note: The best way to keep things moving is to enlist a reliable team—your mortgage broker and real estate agent will play key roles here—and take responsibility for watching the workflow before logjams occur. If there’s a slight delay, try not to sweat it. This happens, even in something as seemingly routine as refinancing a home. (When I did this in 2010, the bank sent out an assessor not once, but twice, because they didn’t believe the reported market value of our property.)
If delays occur, ask someone on your team to look into whether it’s routine, or a sign of something more worrisome. Be polite and professional, but persistent, as you ask the parties to help get things rolling again.
Finally, remember who your friends are, especially if they’ve just been through a home closing themselves. Whenever panic started to set in back in 2001, I turned to my friend Mark Caro, who had just been through a closing himself. He explained to me, in ways the professionals sometimes couldn’t, how to stay calm as I dove into a sea of paperwork.
That’s how life is, right? We look to our buddies and family members who’ve been through these big experiences before us, and who’ll help us keep our sanity as we try something new in our financial lives. So when you get through your closing, and feel the satisfaction of finally calling yourself a homeowner, remember those in your posse who wait in the wings—and when it’s their turn, pass on your hard-won wisdom.
Have you been through one or more home closings? How did they go? Did you learn anything that you would do differently next time?