Question: Why does it take so long to Close on a home after I buy it?
Answer: You’ve finally come to terms after a grueling negotiation. You may have had to battle other parties in order to buy the home of your dreams. And now that you know it’s yours, you’re ready to move on and move in. But wait…not so fast. The contract states that it will take 30 days, 45 days or even longer for you to finally call the home your own. And, in addition there may be some more time before you can move in. You’re asking why?
After all, when you negotiate to buy a new car, you hand over the money and drive the car off the lot. Well, that’s the crux of the situation when it comes to buying a home. The money thing doesn’t happen quite as quickly as it would for a loan for a car. In fact, the money thing aka obtaining a mortgage is quite an involved process.
*Please note that there are many different kinds of mortgages, so processing for your mortgage may not be exactly as stated. If you’ve got questions about your specific situation, speak to a Lender. We can recommend one if you don’t have one. Which would be a scary thought at this stage of the game…What the heck are you doing making a promise to buy a house when the money isn’t in order???
Anyway, we’re presuming better things for our readers…
Here are some things that have to happen before the Lender turns over the money to buy your house so you can give it to the owner.
1. Inspections: If you’re having the home inspected (read this to find out why you should), the Lender will want to ensure that you and the owner have come to terms about any repair issues PRIOR to spending any more of your money. (Inspection negotiations can take up 2 weeks to be settled in West MI)
2. Appraisal: The Lender will order an appraisal to make sure what you’ve agreed to pay for the home is what they’re willing to risk lending to you. This document is reviewed and must be satisfactory to the Lender before they agree to lend money. If there are issues, such as your home not appraising for the value you agreed to purchase it for…well, the process stops. It can stop for good or you may be able to mitigate a negotiated solution. Either way, there is time involved in this process.
3. Loan Processing: Depending on the type of loan and the Lender involved, the bulk of time for closing your home is spent here. There will be documents you must complete and sign which then have to be reviewed and verified. There are documents you will need to provide for review. The appraisal will need to be reviewed. Your credit, income, debt and employment will need to be reviewed, verified and approved. All this review takes time as your loan may pass through several different hands and departments before it lands in the Closing Department where it may spend an additional week for review and processing.
4. MISC: Survey, Well & Septic Inspections, Sidewalk Inspections etc: Depending on your contract, additional inspections such as surveying, well and septic inspections may also be required. In Grand Rapids, MI we were just recently relieved of having to complete a sidewalk inspection in order to purchase your home. That’s right – for more than a decade, folks living in Grand Rapids had to have a certificate to prove that their sidewalks were in good order. Most amazing was that this certificate was required even when there was NO SIDEWALK. Thankfully, in 2014 this additional step is no longer necessary as a requirement to be completed prior to purchasing your home.
5. Coordinating the Closing: By the time 4-6 weeks have gone by, most people are anxious to be through with this process. But life sometimes happens and schedules may not exactly mesh. These inconveniences may add a little more time into the mix, but it’s usually not much. The money from the bank has to be dispersed within a specific amount of time, so expect a flurry of activity to help ensure that delays are minimized. If you’ve got an attorney involved in reviewing your documents, make sure they are aware of your time constraints ahead of time.
Sorry folks, this has been loooooong explanation for a very short question. But, this is the reason why closing a home can seem to take so long. Now, if you’ve got the CASH to buy the home, the process is considerably shorter!
About the FAQ (Frequently Asked Questions Series)
This series is designed to answer questions that we hear clients asking over and over again. Perhaps, you’ve wondered about some of these questions yourself. While this is not intended to be an exhaustive explanation on the subject being discussed, it is our hope that these short blogs will provide helpful insights and may encourage you to explore further. Please feel free to contact us by phone or e-mail with any questions.