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How Long Does It Take To Buy A House?
David McMillin
Buying a home doesn’t deliver the instant gratification you’re accustomed to in today’s e-commerce world. While you might be able to hit the “Buy Now” button and pick same-day delivery with loads of other purchases, buying real estate requires a number of steps.
Timeline to buy a house, step-by-step
Step 1: Get preapproved
If you’re going to borrow money to buy a house, the first step is to get preapproved for a mortgage. A mortgage lender will typically ask for information about your assets, income and credit history to make their assessment of how much they’re likely to loan you. In some cases, lenders with online-focused operations can issue an automated preapproval letter on the same day. The letter will serve as evidence to sellers that you’re a qualified buyer. Preapprovals aren’t good forever, though — they typically last between 60 and 90 days.
If preapproved, you’ll receive a loan estimate within three business days after applying for a mortgage that outlines your loan amount, interest rate and other loan details. It’s important to compare options, too. The Consumer Financial Protection Bureau recommends getting loan estimates from at least three different lenders.
Before you begin the preapproval process, consider what you’ll look like in the eyes of a lender. Do you have any errors on your credit report? Are you carrying a hefty balance on a credit card? Think about the preapproval process as a chance to show off your best self. Lenders need to feel confident that you will be a responsible borrower.
Here’s a general timeline of what you’ll need to prepare before submitting paperwork for a mortgage preapproval:
- At least 6-12 months before: Start saving up for a down payment (if you haven’t already) so you can show a lender you have the means to purchase a home. Also, try to get a broad picture of your financial situation by checking your credit report and score. Lenders will look at your credit history (and, by extension, your credit score) to see how creditworthy you are. Understanding what’s in your report now will give you a chance to raise your credit score if needed. Then, when it comes time to get preapproved, you have a better chance of landing a better rate.
- 3-5 months before: During this time, avoid taking out any new loans or making other major changes, like switching jobs. Doing so could affect your eligibility for a loan. Lenders look at your debt-to-income ratio, or DTI, for example, to see whether you can afford to manage your monthly payments. Keeping the status quo in your finances, income and job situation can help you avoid delays in your loan approval.
- 1-2 months before: This is a good time to start organizing the paperwork you’ll need to submit for a preapproval. Documents typically include recent paystubs, two years of federal tax returns and two months’ worth of bank statements.
Step 2: Find a home
Now that you’re preapproved for a mortgage, you know how much house you can afford. That means it’s time to start looking for one. At this stage in the process, you can work with a real estate agent, check out open houses and start house-hunting in earnest.
It’s important to note that this step can take more time than you might expect, because housing inventory is still tight. According to the National Association of Realtors (NAR), the country had a 3.3-month supply of homes in July 2022 — that’s up from January’s record low of 1.8 months, but still well short of the 5 or 6 months required for a balanced market.
Step 3: Make an offer
Once you’ve found the house you want to buy, your real estate agent will help you submit an offer. Your agent can help you decide on an offer that’s competitive, aligned with home prices in your area and reflects your best interest. The offer might also include contingencies, which help protect you if you end up needing to back out of the offer.
If you’re able to make an all-cash offer, you can reduce your time to close. Without a need to secure financing, you won’t have to deal with a financial institution. However, even all-cash transactions require some waiting as the seller works out all the details and paperwork, so keep that in mind.
It’s also important to recognize that making an offer is a step you could wind up repeating, depending on how hot your local market is. NAR data from early 2022 indicated that only 25 percent of buyers were successful with their first offer. But times changed as mortgage rates rose significantly over the course of the year, so the market is not quite as competitive now.
Step 4: Go to contract and put down earnest money
If your offer is accepted, you’ll go to contract and have to make an earnest money deposit, which is an amount of money you put down in good faith to assure the seller you’re serious about the purchase. Think of this as another signal that you’re committed to doing all the work ahead toward actually closing on the house.
Step 5: Schedule a home inspection
The next step should be a home inspection. Depending on your state’s laws, a home inspection typically needs to be completed within a set number of days after you sign a purchase agreement. If the inspector uncovers any major concerns, you might want to negotiate repairs or seller concessions, which could take more time.
Step 6: Wait out the closing process
At this point in the process, you can expect to do some waiting as your lender moves the loan into underwriting. In this time, you may need to submit additional documentation for your lender to clear your loan to close, and the lender will order an appraisal to assess the home’s value.
The type of loan you take out could alter the timeline slightly, because of the types of assessments and paperwork needed. For example, an FHA purchase loan currently takes one day less than a conventional loan, according to ICE Mortgage Technology (49 vs. 50). And VA purchase loans have historically taken a bit longer to close, due to additional documentation requirements like a VA Certificate of Eligibility.
If there have been major changes to your financial situation since you were preapproved, your loan might be delayed as well. Lenders can get a bit spooked if you change jobs, open a new line of credit or make any other big money-related decisions between the time you apply and the time they’ll actually give you the funds.
Once your mortgage is approved, your lender will give you a copy of your closing disclosure at least three business days before the closing date. The disclosure lists all the loan details, fees and terms, as well as what you’ll need to pay in closing costs to finalize the purchase.
Step 7: Sign the closing documents and get the keys
Finally, after all that work, closing day has arrived. You will need to sign a small mountain of paperwork. You’ll also need to pay closing costs, if you didn’t opt to roll those expenses into the loan. And you will likely need to pay with a cashier’s check, as personal checks are typically not allowed. How long does this final step take? It varies, but you should plan on spending at least two hours dealing with all the documents.
How to avoid delays when you buy a house
According to NAR, 15 percent of home sales encountered some delays that held up the closing in June, July and August 2022. There are a wide range of potential issues that can create stumbling blocks, including:
- The buyer has trouble securing financing.
- The appraisal report comes back with a value that doesn’t match the loan terms.
- The home inspection report identifies the need for serious repairs.
- There are issues with the title/deed.
- There are issues with hazard and flood insurance.
- The buyer loses his or her job.
One of the most common reasons for a delay recently has been an appraisal gap. According to data from CoreLogic, 20 percent of home sales had appraisals that came back lower than the agreed-upon offer price in May of 2021. However, those appraisal gaps became less common by the end of the year. Now, in 2022, the housing market does appear to be cooling off, which means that appraisal issues may become less common.
The best way to avoid delays is treat communications from your lender as a top priority. If your lender requests additional documentation of your income or employment, for example, respond as quickly as possible.
One last simple rule to help make the process pain-free: The earlier you get a head start on ironing out your finances and securing a preapproval, the more likely you’ll have a relatively smooth and quick transaction.
