This is a sponsored post written by me on behalf of Money Under 30 for Credit Karma
As a serial renter, I’ve had my fair share of difficult landlords, and less-than-favorable rental agreements. Some of my recent renting woes include not getting reimbursed for expensive plumbing repairs, and listening to an hour-long lecture about why it’s forbidden to decorate my walls with peel-and-stick wallpaper.
Needless to say, I can’t wait to have my own place where I can do as I please, without having to butt heads with my landlord every step of the way.
But how long does it take to buy a house?
Well, here’s a complete timeline based on my research, along with conversations I had with mortgage and real estate experts. I’ve also included some tips to make the process quicker, so you can finally kiss renting goodbye.
Buying a house: the complete timeline
1. Getting pre-approved for a mortgage: 24-48 hours
Okay, I know that dealing with the financial aspects of getting a house isn’t as fun as house hunting, but this should be the first step of the process.
Because it will give you a realistic idea of what your budget is going to look like.
Read more: How Much House Can You Afford?
“being pre-approved means that you basically can go out and look at houses and do something about it.”
In other words, you’ll be able to make an offer faster.
When getting pre-approved for financing, you want to choose the lender that’s going to give you the best terms and rates for your financial situation. If you aren’t sure where to start, you can check out websites, like Credit Karma, which will allow you to compare rates from top lenders and get quotes.
The pre-approval application only takes a few minutes to complete, and McKay says that you can get a response as soon as 24 hours after the application is sent.
To get pre-approved, you’ll need the following:
- A copy or picture of your ID.
- Copies of your two most recent pay stubs.
- Your Social Security number.
- Tax returns from the past two years.
- 60 days of bank statements.
- Asset account statements (retirement accounts, investment accounts, etc.).
2. Finding a home: 4.5 months, on average
A recent report by Zillow revealed that the average American spends 4.5 months looking at properties, and attends more than two open houses before finding “the one.”
When searching for properties, Jessica Lautz, vice president of Demographics and Behavioral Insights at the National Association of Realtors (NAR), says that the best course of action is to look for an expert to help you with the process, instead of trying to find a home on your own.
“A local real estate agent or broker may help you find overlooked homes or even neighborhoods where homes may be affordable or just need a little DIY repair work.”
3. Making an offer: 1-3 days (for the seller to respond)
Once you’ve decided on a house, it’s time to make an offer. The offer letter is usually prepared by your real estate agent and includes the terms of the sale, how much you’re willing to pay for the property, and a target date for closing.
Although most sellers respond within 72 hours after you’ve made the offer, it may take longer to get an answer if they’ve received multiple offers, which isn’t uncommon, especially if you’re in a market where there is low inventory.
Lautz says that first-time buyers usually need to put in offers on a few properties before a contract is accepted.
“That process can be frustrating, but having patience and an expert on their side to negotiate terms is essential.”
If your offer is accepted, you’ll go into contract and will have to put down earnest money, which is a “deposit of good faith”. This is usually between 1% and 2% of the purchase price, and is later applied to your mortgage once it goes through.
4. Home inspection: 2-3 hours – a couple of days to get the report
After going into contract with the seller, the next step is for you to schedule a home inspection. This will ensure that the house is in livable conditions and that there aren’t any serious flaws, like structural damages.
Home inspections usually take a few hours to complete, depending on the square footage of the house, after which, you’ll receive a report with recommendations (if any) on any repairs needed.
If any issues are found, you can always negotiate with the seller to have those fixed before you move, or you can also ask for a price reduction if you want to do the repairs yourself.
5. Wrapping up your loan application and closing on the property: 30 to 60 days
After searching for a home, finishing the loan application and closing on the property is the most time-consuming part of the homebuying process. McKay, from AIME, says:
“The pre-approval basically covers everything related to the buyer, their finances, and credit. Nothing related to the property can start until the contract is signed.”
To finish the loan application, you’ll need to submit your purchase agreement and details of the sale. Then, the lender will have the house appraised to determine its true value, as well as start the underwriting process and check if the property’s title is clear. McKay adds:
“The appraisal is probably the slowest part of the process. There are many areas right now where there are millions of people moving there, and there are only so many appraisers out there.”
The fastest you can finish the application and close on the loan is three weeks. However, data from ICE Mortgage Technology suggests that the average person has to wait 51 days to close on a conventional purchase loan. It’s also worth noting that if you’re applying for an FHA or VA loan, that timeline can stretch to 54 and 56 days, respectively.
Tips to speed up the homebuying process
Make sure your finances are in order
Before looking for homes, be sure to check if both your credit score and your debt-to-income ratio (DTI) make the cut, as these are the two most important factors to determine whether you’re approved for financing.
You’ll typically need a credit score of at least 620 to qualify for a conventional loan, and 580 for government-backed loans, such as VA and FHA. As far as the DTI goes, lenders prefer that you have a DTI of 43% or lower.
Have all of your documents ready and respond quickly
“The biggest delay in the mortgage lending process is client response time,” says McKay. This is why he recommends gathering all of the paperwork needed in advance and having it with you, so you can send it over as soon as the lender requests it.
Also, keep both your real estate agent and lender on speed dial, so you can follow up with them at every step of the process.
Steer clear from short sale properties
Short sales happen when sellers in distress sell the property for less than what they owe on the mortgage to avoid foreclosure.
Although that may be a great deal for you, as you can buy a property at a discounted price, these sales take longer than usual to complete, as the original lender has to agree on the sale, which means they’ll be losing money.
Make a cash offer
Okay, hear me out. I know a lot of people (myself included) don’t have the money upfront to purchase a house. But many sellers will accept your offer faster if you have cash because, you know, cash is king.
Additionally, you won’t have to wait for a bank to underwrite and process a mortgage application, which will save you time.
Purchasing a house can be a lengthy process, but one that’s worth the wait. Not only will you have a place to call your own, but also a long-term investment that could help you build wealth in the future.