How Long Does the Mortgage Closing Process Take?

You’ve put an offer on a home, and it was accepted by the sellers. Fantastic!

But the deal isn’t done yet.

Then comes the mortgage approval and closing process. Many homebuyers find this session to be a real nail-biter – after all, anything can happen between offer acceptance and a sealed deal.

So how long does it take for a mortgage to close?

That all depends on the type of mortgage you’ve applied for, your specific financial situation, your application, and the processing efficiency of your lender. In general, you can expect the typical mortgage to close anywhere between four to eight weeks after the application date. One of the best ways to speed up the process is to make sure the application has been completed in full, and is free from errors.

When Was Your Mortgage Application Completed?

The day that your mortgage application was completed is key in determining the closing date. Just filling out and submitting a mortgage application form (Form 1003) isn’t enough. You’ve got to make sure that income verification accompanies the application submission. This includes a minimum of two pay stubs from your place of employment and the past two years worth of W-2 or 1099 forms.

The lender might want additional documents as well, including those from any previous financial institutions, the purchase agreement, proof of a down payment, and a letter of explanation (LOE) pertaining to any negative information on your credit report.

Before the application can go to underwriting, it’s got to be deemed “complete,” which means it must include the original signed application and the completed home appraisal, in addition to your supporting documentation. Keep in mind that unique homes and properties located in areas with few comparable sales can make the process take a little longer.

From here on out, how fast the mortgage can close will be based on how closely the supporting paperwork matches the original loan application, and how fast other parties pertinent to the transaction (such as insurance agents, condo associations, and mortgage insurers) can come up with additional supporting paperwork.

A complete or “clean” file can be underwritten in two business days, but every time an additional round of verification is needed, that’ll tack on another two days to the cycle. The actual underwriting process can take up to two weeks or longer in certain cases.

Conventional Mortgage

Any mortgage that isn’t insured by the FHA is considered to be a conventional mortgage. These types of loans can take about 3 or 4 weeks to close. All the lender needs to do is order and go through your credit report, receive a completed appraisal, and verify the amount of your down payment before issuing an approval. Once you’ve accepted the loan, the lender will send your file to the closing agent who will search the title and prepare the closing documents.

FHA Mortgage

An FHA mortgage is one in which the US Federal Housing Administration (FHA) insures the mortgage in order to protect the lender in the case where a borrower defaults on the loan. With these types of mortgages, it can take a little longer to close compared to a conventional mortgage. The traditional rule of thumb has been about eight weeks, but over the past few years, the FHA has streamlined the closing process and many times can close loans as quickly as conventional mortgages.

The reasons why it used to take longer was because the FHA doesn’t directly make loans, and only insures the loan amount. Prior to technology kicking in, lenders needed to mail a completed application to the FHA for its approval. Thanks to electronic procedures, a much faster FHA approval is possible.

Mortgage lenders want to close loans just as quickly as you do, but they absolutely need completed applications to make this possible. That’s why it’s imperative that you make sure you’ve got all your ducks in a row before you submit your applicant.

If you’re absolutely paranoid about not closing within an acceptable time frame, you can always opt for a 45-day rate lock instead. While you’ll almost certainly close within a 45-day time period, the caveat here is that you’ll be paying an additional 0.125% on your mortgage rate for this service.

Be sure to consult with your mortgage specialist and real estate agent to get some straight answers about your specific mortgage closing.