![\"Know](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/12\/why-does-closing-take-so-long-time.png\")
<\/a>Why does closing take so long? Mortgage vs cash<\/h2>\n
According to the latest homebuyer data, buying a home with a mortgage takes an average of 48 days<\/a> for purchases and 57 days for refinances. A cash sale, on the other hand, can close in one to two weeks.<\/p>\n But why does a mortgage take so much longer?<\/p>\n \u201cThe lender has to do a lot of due diligence on both the borrower and the property before they can close on the loan and wire the money,\u201d shares Sanchez.<\/p>\n \u201cWe have to ensure that the property appraises, and that it isn\u2019t rotting and termite-infested and falling down. We have to ensure that the borrower is employed, that their income is viable. We have to verify down payment assets. And all of those things take time,\u201d she adds.<\/p>\n When you\u2019re a cash buyer<\/a>, the transaction is a lot simpler. You simply show proof of funds with your offer, and provided everything goes normally, you wire the money when it comes time to close.<\/p>\n With cash, due diligence falls squarely on the buyer. It\u2019s up to you to make sure the property is in decent condition and worth what you\u2019re paying for it. For that reason, it can be a bit riskier to purchase a home in cash<\/a> \u2014 but it\u2019s also nearly guaranteed to be faster.<\/p>\n When you apply for a mortgage, you\u2019re allowing the lender to probe into your financial history. You\u2019ll need to submit to a credit check and be ready to hand over quite a few financial documents to your lender<\/a> so they can determine your creditworthiness.<\/p>\n These days, almost every lender has an online experience where you can apply for a home loan, consent to a credit check<\/a>, and upload your financial documents<\/a> for review.<\/p>\n It should take you around 30 minutes to fill out an online mortgage application \u2014 that is, provided you have all your documents in order. Preparing the documents could take minutes or days, depending on how organized you keep your finances.<\/p>\n \u201cAny buyer who\u2019s ready to apply for a home loan should talk to a loan officer ahead of time before even starting the application to obtain a list of documents you need<\/a> to gather,\u201d Sanchez advises. \u201cIf you do that proactive work ahead of time, the filling out of the application is going to be a lot quicker for you.\u201d<\/p>\n After you\u2019ve submitted your application with all its documentation, the ball is in the lender\u2019s court. They\u2019ll need to go over your documentation with a fine-toothed comb and make sure everything is complete, legible, and correct.<\/p>\n If there are any errors, missing documents, or inconsistencies, then you can expect to hear from the lender, who will request any necessary follow-up documentation to straighten out the confusion. Once they have everything they need, the lender should make a decision about whether they\u2019ll agree to preapprove you for a mortgage loan, and how much they\u2019re willing to loan you.<\/p>\n Sanchez says buyers who come into the application process prepared tend to hear back from their lender quicker.<\/p>\n A standard lender can take anywhere from three to five days to get back to you once you\u2019ve completed your application. However, Sanchez explains, that doesn\u2019t necessarily mean they\u2019ll have a decision ready for you.<\/p>\n \u201cGetting back to you can mean they approved you for a loan, or they\u2019ll come back after three to five business days and say, \u2018Oh I need more information from you,\u2019\u201d she says.<\/p>\n If you happen to be missing documents, it could set your pre-approval back days, or sometimes even weeks.<\/p>\n This hurry-up-and-wait can cause frustration for a lot of buyers. Lender wait times can pile up, especially during busy seasons.<\/p>\n During high volume times for the mortgage industry \u2014 such as the current coronavirus refinance boom<\/a> \u2014 lenders become strapped for resources, and quick communication is often the first thing to go.<\/p>\n To compound buyer frustrations, Sanchez says many lenders barely review your application upfront when you apply.<\/p>\n \u201cNot every lender does a full-fledged review of the buyer upfront,\u201d she explains. \u201cThey just have the loan officer review your pay stubs and your bank statements and run your credit through, and say \u2018Yeah, this looks good \u2014 you\u2019re pre-qualified for $500,000. Go shop for a home!”<\/p>\n It\u2019s only when the buyer actually goes under contract<\/a> on a home that the underwriter looks at the file for the first time.<\/p>\n This approach can spell trouble for buyers because underwriters are the people who actually make the decision about whether or not to extend you a mortgage loan.<\/p>\n At the very least, you\u2019ll likely be hit with a ton of document requests once you\u2019re under contract.<\/p>\n In the worst-case scenario, the underwriter could find an error or discrepancy on your application the loan officer didn\u2019t see, and you won\u2019t qualify for the loan.<\/p>\n You don\u2019t have to be at the mercy of your lender\u2019s timeline \u2014 provided you choose the right one.<\/p>\n Some lenders provide what\u2019s called an upfront underwrite, meaning they have an underwriter review your application and vet your financials before<\/i> issuing a preapproval.<\/p>\n An upfront underwrite makes your offer stronger and gives you the confidence that your loan will be approved once you\u2019ve had an offer accepted on a house. Plus, it saves a lot of valuable time, and you can avoid some frustrating back-and-forth with your lender.<\/p>\n Make sure to ask prospective lenders if they do an upfront underwrite, and how long it takes to get a preapproval decision. You can also ask if they guarantee to close within a certain timeframe.<\/p>\n Underwriting is the process of evaluating your file and making the final decision on your loan. Underwriters also help process the loan from start to finish.<\/p>\n \u201cUnderwriting has milestones. It\u2019s not just one process for underwriting,\u201d Sanchez explains.<\/p>\n \u201cThe underwriter touches the loan at various milestones throughout the life of the loan and getting it all together.\u201d<\/p><\/blockquote>\n This includes everything from gathering title paperwork to getting the appraisal back to getting updated pay stubs from the buyer when it\u2019s closer to closing time.<\/p>\n Here\u2019s a non-exhaustive list of the different \u201cmilestones\u201d the underwriter will hit over the course of your loan:<\/p>\n The turnaround times for underwriting vary drastically from lender to lender, depending on what the underwriter has on their plate.<\/p>\n \u201cThe underwriting process itself is not lengthy,\u201d Sanchez reveals. \u201cIt just depends on how many other loans an underwriter is working on and where your loan is in line. Underwriters are working on many loans at one time.\u201d<\/p>\n She adds: \u201cFor me, it really only takes me an hour to review a full-fledged file. But from a borrower\u2019s perspective, you\u2019re not going to hear back in an hour because the underwriter has to review five other loans.\u201d<\/p>\n All told \u2014 when you take into account each of the various milestones of underwriting \u2014 Sanchez says processing the entire loan usually takes around 21 to 30 days.<\/p>\n A buyer\u2019s best defense against underwriting delays? Be prepared with any documents your lender needs and quick to communicate with them.<\/p>\n Many buyers find themselves frustrated when the lender keeps requesting the same (or sometimes similar) documents. The back-and-forth can take days, especially when you miss something crucial in a document, or make errors \u2014 even minor misspellings can hold things up.<\/p>\n Keep all your financial documentation organized and available for follow-ups from your lender. Having everything you need together in one place will keep these requests quick and keep you on track with your closing timeline.<\/p>\n Read and re-read all documents you send to your lender for errors. And when the lender makes a request, try to get back to them quickly. The quicker you get all your perfectly prepared documents in, the quicker you\u2019ll close.<\/p>\n When you take out a mortgage, you\u2019ll first need to clear a pretty big hurdle: the appraisal<\/a>. That\u2019s when a neutral third party researches your prospective home and all its features and looks at comparable sales<\/a> in the area to determine its fair-market value<\/a>.<\/p>\n Appraisals are required by mortgage lenders so they don\u2019t loan you more than the home is worth. But really, the appraisal process protects both you and the lender.<\/p>\n Unfortunately, the appraisal is also a part of the process that can hold the deal up when there are long wait times for appraisers.<\/p>\n \u201cRight now the industry is suffering from long appraisal turn times for various reasons,\u201d Sanchez explains. \u201cThe most notable one is that interest rates are extremely low right now for mortgages, and that\u2019s causing a huge backlog of loans across the country with all mortgage lenders. This refinance boom is creating this backlog of business.\u201d<\/p>\n That backlog means that currently, appraisals are taking around 30 days. But how long an appraisal takes depends highly on your area.<\/p>\n A small town may only have a few qualified appraisers, so things can take longer. In busy city markets, appraisals can be quicker. (That is, depending on demand.)<\/p>\n If you\u2019re getting a home loan, skipping the appraisal isn\u2019t exactly an option. And you\u2019re unlikely to have much control over your appraisal timeline.<\/p>\n The only way to avoid doing an appraisal? Paying in cash.<\/p>\n We know, we know \u2014\u00a0if you had several hundred thousand dollars lying around, you probably wouldn\u2019t be reading a blog post about mortgages just for fun. But the good news is, you don\u2019t necessarily need several hundred thousand dollars lying around to make a cash offer!<\/p>\nApplying for a mortgage<\/h2>\n
What\u2019s involved?<\/h3>\n
How long does it take?<\/h3>\n
How to avoid a delay<\/h3>\n
<\/a>Reviewing a loan application and offering preapproval<\/h2>\n
What\u2019s involved?<\/h3>\n
How long does it take?<\/h3>\n
How to avoid a delay<\/h3>\n
<\/a>Underwriting the loan<\/h2>\n
What\u2019s involved?<\/h3>\n
\n
How long does it take?<\/h3>\n
How to avoid a delay<\/h3>\n
<\/a>Confirming the appraisal price<\/h2>\n
What\u2019s involved?<\/h3>\n
How long does it take?<\/h3>\n
How to avoid a delay<\/h3>\n