Can You Close An Escrow in 30 days?

When you purchase a new home, it can be one of the most exciting times of your life. You finally found the right home, made an offer and the seller accepted. 

You can’t wait to move in as soon as possible.

You’re ready to hire the movers, transfer the utilities, and start packing your boxes.

Well, not so fast.   While there are some situations when an escrow can close in 30 days, the average closing time usually takes longer depending on a number of factors.

Unless you are paying all cash for your home, which most of us don’t, the average closing time once the offer has been accepted is between 45 and 47 days according to the leading mortgage software company Ellie Mae.

There are numerous factors that can play into the timeliness of how quickly the loan closes.

In order to speed up the closing time, a buyer should do the following:

Get Your Loan Pre-Approved

If you have your loan pre-approved, it can speed up the closing time because the lender will not have to go through all the paperwork that is necessary to get the loan approved. It is also beneficial to you, as the buyer, to make sure that you can afford the loan and therefore the home you are purchasing.

Pre-qualifying for a loan is not the same as pre-approval and a loan will close faster if there is a pre-approval.

To get your loan approved, your lender will need to verify your employment, bank accounts, credit reports, tax returns, and other relevant financial information. When all is said and done, you can start the next steps towards closing.  This should all occur before you sign the purchase contract.

Choose A Credible Lender

If your lender is not on top of the paperwork or isn’t motivated to close, it can lead to delays. The best way to avoid this is to find a credible lender who has a reputation for closing.

A big bank or federal institution typically takes longer to close because they have restricted guidelines and aren’t in a rush to close. Most mortgage lenders are at least more motivated to close because they are receiving a commission.

If the lender has verified the borrower’s employment and all the necessary paperwork, the closing can occur as soon as the underwriters review the appraisal which is usually one or two weeks.  

If anything document is missing the closing can be delayed.

The most common loans that are available are the following with the usual closing timeline according to Ellie Mae:

·      FHA Conventional loans:      44 days

·      FHA loans:                             45 days

·      VA loans:                               48 days

Appraisal

You can order an appraisal right after you have given your lender the “Intent to Proceed” form which you have signed. The sooner you can get the appraisal started, the sooner you can close. If you can find a credible appraiser who even can get started right away, the appraisal should be done in a week.

The appraisal process is when the appraiser performs an inspection and prepares their appraisal report. The typical appraisal can take from up to two weeks and if the appraisal is too low or doesn’t come in at reasonable price, this could delay closing.

Next steps in closing:

Conditional Approval

Once you submit your application and the underwriter has reviewed it, if all the paperwork is ready to go, the lender will give you what is called a conditional approval.

This type of approval generally has a listing of all the documents that you must complete before the underwriter will sign off on your final loan approval.

However, any necessary requirements or documents that are missing could cause them to deny your file and you will need to address any of their requirements. This could cause a delay of at least a few days or up to a week.

Even under the best case scenario, this process could take up to two weeks.

Almost ready to close

Once you get everything approved by the lender, they will send to you the final closing disclosure which will specify all the loan requirements, the necessary fees, costs and all relevant information for you to review.

The general turn-around time is 72 hours or 3 days and no sooner.

The reason that loans are closing more slowly these days is due to the TILA-RESPA Integrated Disclosure laws, which became effective at the end of 2015.

The TRID guidelines require mortgage lenders to send the paperwork to their borrowers 72 hours before closing and that if there are any changes to the documents, there will be another disclosure necessary which could add another 72 hour waiting period.

If all goes well, then the final step is to sign all the necessary closing documents which can usually be done in 24 hours.

Funding

After the final loan requirements are signed by you, your lender then needs to make sure everything is properly documented before processing and disbursing your loan. 

Once the loan has been properly funded, your mortgage will be recorded and this can usually happen within one business day.

While this is the best case scenario in order to close timely, there are other factors that can slow down the closing.

What causes delays in closing?

First Time Buyers 

If you are a first time buyer, the loan process will sometimes take a little longer because there are usually more than one underwriter involved.

Inspection problems

If there are any problems that are found during a home inspection, it can lead to delays in closing.  

For the buyer, it is important to start the home inspection as soon as possible so that anything that needs fixing by the seller can be done prior to closing.

If the pest inspection finds termites or if any other systems or major appliances in the house have issue or aren’t working properly, it can lead to some delays as well. 

Title

If there are any liens against the title update or any clouds on the title report, this could cause another delay. Any judgments, liens or bankruptcies on the title need to be lifted or it can take time to clear them.

A savvy seller will make sure the title is clear and encumbrance-free before accepting an offer. 

Credit Report

If there are any mistakes on the buyer’s credit report or any additional debt on the report, it will further delay closing.

During this time, a buyer should not sign up for any new credit card or do anything that could affect the credit report.

Homeowners Insurance

Any buyer who takes out a loan will be required to enroll in homeowners insurance. The sooner this can occur, the better. The lender will not go forward with the loan if the homeowners insurance is not complete.

Loan Estimate

If there any substantial changes to the loan estimate or the fees that occur, this could also affect closing.

While there are numerous factors that can affect the closing of your home, the best thing you can do is to prepare in advance, whether you are the buyer or the seller, to have all the necessary paperwork completed, clear the title and have any problematic issues dealt with immediately.

Lisa Fimberg is a freelance writer who specializes in real estate, all types of insurance, business loans and all things pet-related!