How Long Does It Take to Buy a House?
How long does the Home Buying Process Take?
Have you been scouring the web for homes online in your area? Wondering how long it actually takes to buy a house once you’ve decided you’re ready? These are excellent questions. The length of the home buying process can vary significantly. It all depends on the area you want to buy a home in, your eligibility, and several other variables. In this article, we’ll look at the steps in the home buying process along with estimates of how long each step takes.
How Long does the Home Buying Process Take?
From start to finish, it can take between 30 days and a few months to get approved for a mortgage loan. There are three steps to this process, but only the final two are required: prequalification, preapproval, and final mortgage approval.
What are the Steps to Getting Approved for a Mortgage?
Here’s a breakdown of the three main steps to getting approved for a mortgage, and roughly how long each step takes.
How Do I Get Pre-Qualified for a Mortgage?
What is pre-qualification?
It’s an informal process designed to help you see if you’re eligible for a mortgage. If so, a prequalification helps you understand how much you can borrow. You can get pre-qualified by most lenders — online or in person — no matter which lender you ultimately to use for your mortgage product.
Be aware, though — prequalification is an informal process. It’s based on the basic, initial information you provide to the lender. It’s not a guarantee you’ll get a loan — it’s just the amount you might be approved to get. Since getting pre-qualified is just a quick check, becoming a pre-qualified buyer isn’t as important as being a pre-approved buyer. Getting pre-approved requires more thorough investigation; we discuss it in the next section.
Average time it takes: Minutes to 3 days
What it is: A prequalification is a little like getting pre-approved. During this step, the buyer and the lender can discuss goals and needs relating to the mortgage. The lender can help a buyer understand various mortgage options and recommend the best types for the buyer’s situation. Pre-qualifying gives a lender a high-level overview of the buyer’s finances. It also gives the buyer an idea of what they can afford.
What you need: You don’t need formal documentation for this stage. You should provide the most accurate information about your income, credit, and employment history. This way, you’ll be able to gauge how much house you can truly afford.
How Do I Get Pre-Approved for a Mortgage?
Getting pre-approved for a mortgage is a vital step in the home buying process. In the pre-approval process, a home loan lender will take a detailed look at your credit report, your financial history, and your income (including your debt-to-income ratio, or DTI).
Average time it takes: 3 days to 3 months. The time it takes for pre-approval can be very different for each lender and buyer. Highly qualified buyers typically have a shorter process. Getting pre-approved can take longer for those who may have more intricate financial situations including bankruptcy, divorce, investment properties, and self-employment.
What it is: Pre-approval is a formal process in which a lender assesses your financial standing. Pre-approval assures a home buyer that they will be approved for a mortgage when ready to apply. This process can dramatically speed up the time it takes to get approved for a mortgage. Additionally, most home sellers require a buyer to have a pre-approval letter before making an offer on a house.
What you need: Driver’s license, social security card, 2 months of bank statements, two years of employment history (W-2s or tax returns), and 1 month of paystubs.
Finding a Home and Negotiating a Contract
Home selection is another step in the home purchase process that can vary greatly in length. Finding a house to buy can be fun, but it can be difficult. For example, it may take some time to find dream homes in the area you want that you can also afford. Despite the challenges, when you do find a place you think is worth buying, your real estate agent can help you put in an offer.
Typically, the seller will respond within 1 – 3 days. They will either reject, accept, or counter your offer with a different price. If you accept the offer, you’ll move forward with the inspection and appraisal process, which will often take around two weeks. Assuming there are no major issues, the sale will go forward. There may be delays, like the need for a pest inspection, home inspection, or the need for the seller to complete repairs.
What’s a loan commitment?
The final step in the process is called a loan commitment. A loan commitment is issued only after the lender approves you — the borrower — and the house you’re purchasing. The loan commitment means the home should be appraised at or above the sales price.
Be aware: the terms “mortgage commitment” and “loan commitment” can mean different things to different lenders. These terms aren’t standardized or regulated, so be sure to ask your lender. For example, some lenders issue a loan commitment letter after the underwriting while others issue the letter before underwriting.
A mortgage commitment letter or a loan commitment letter usually:
Indicates the type of loan being used
Specifies the length or term of the repayment period
Notes the amount of money being borrowed
Records the interest rate for the loan
Comes with a list of conditions that must be met before proceeding
Average Time it Takes: 20 – 45 days
What it is: A lender only issues a commitment letter when they are certain they will lend. The commitment date on your purchase contract should be closer to closing than the date of your offer. The seller can see the letter as soon as that date has passed. Don’t let anyone put an early commitment date into your contract.
What you need: You’ll need to meet any mortgage conditions the lender specifies. These are the things you must do before you’ll receive final approval from a lender. A conditional approval means the loan will be approved only if you resolve or satisfy certain conditions. At this point, the lender might require additional information, especially if the appraisal noted items to be investigated.
Some examples of mortgage conditions include:
Verifying employment through a letter from the borrower’s employer
Providing proof that the earnest money deposit check has cleared
Paying off outstanding debt to reduce debt-to-income (DTI) ratio
Completing a termite or other pest inspection of the property
Providing additional documents to verify income, debts, and assets
What are the Steps for Final Mortgage Approval?
After requesting mortgage approval, you’ll receive one of four decisions from your lender: approved, approved with conditions, suspended, or denied.
Average time it takes: 3 days to 3 weeks
What it is: You’ve been pre-approved and made an offer on a home. Next, your lender must schedule an appraisal of the home to ensure its market value is comparable to that of your loan amount. This scheduling process can vary, which is why the time period for this stage is such a broad range.
What you need: If you haven’t been pre-approved, you’ll need the same documentation that you would have provided in that stage. If you receive a decision of “suspended” or “approved with conditions,” you’ll need to meet those conditions before being approved. This is discussed in more detail in the loan commitment section of this page.
Closing Timeline for Home Purchasing
Once you’ve selected the home you want to buy, your offer is accepted, and the home has passed its inspections and appraisal, the next step is the closing process. If you’ve been preapproved for a mortgage, this might take around 30 days. If you haven’t, hold your horses, because you could be in for a wait of 60 days or longer. If you’ve experienced any major changes in your financial situation, including a drop in your credit score or a major drop in your income, get prepared for a wait as well. These factors could have a big impact on whether your mortgage is actually approved.
In the end, a savvy, qualified individual can become a homeowner in as little as three months. For some, it can take six months, one year, or even longer. It all depends on the homebuyer’s financial situation and the home they want. No matter when you want to buy a home, it always pays to do research. After all, the more prepared you are, the faster you can buy the home of your dreams.