Thinking about buying a house? Are you curious as to how long it actually takes? Buying a house is not as easy as walking into a real estate store and slapping down cash on the counter. There’s actually several stages that are part of the entire home buying process. There’s getting financially ready, then finding the house that fits your needs, then putting in an offer which most of the time will require some negotiating with the seller. Then once your offer is accepted, you’ve technically bought a house! So however long it takes from getting financially ready to the point where your offer is accepted will depend on each person and finding the house you want to buy.
It’s the closing process once you have an accepted offer that will take some time and how long that will take largely depends on how you’re going to pay for the house. If you’re paying all cash and you don’t need to do any inspections, for example you’re buying a tear-down that you plan to demolish and build new in its place, then it could take you just a few days to close. It could be as simple as wiring the money from your bank to escrow, recording the grant deed and you’re done, short and simple.
If you’re going to finance the purchase though, meaning you’re going to use a loan with a down payment, then it will take longer, about 30-45 days to close. And the reason why it takes that long is because of the processing time for the loan. Your lender is going to loan you big chunk of money and they’re gonna want to check all the numbers before they fork over all that dough. They’re going to have the house appraised to make sure it’s at value. Then the lender will verify your finances, double, maybe even triple check your income, your credit and your down payment to make sure you can afford the loan they’re going to give you. Once all that’s done, they’ll prepare loan documents for you to sign which can take a day or two, or three but it’s getting to this point that will take up the bulk of the time. After you’ve signed the loan docs, the lender will fund the loan, usually the day after you’ve signed the docs, then once payment is verified by escrow and title, the grant deed will be recorded, usually the day after funding. Once the grant deed is recorded, escrow is closed and your purchase is complete. It could take less time, it could take more.
The reason why it can take 30-45 days is because the purchase contract Realtors use, the California Association of Realtors Residential Purchase Agreement & Joint Escrow Instructions, has three important buyer contingencies that each have their own timeframes to clear There’s an appraisal contingency, a loan contingency and a buyer investigation contingency. You can specify how many days you want to clear these contingencies but as a default, the form has 17 days for appraisal and buyer investigation contingencies and 21 days for the loan contingency.
If the longest number of days for these contingencies is 21 days why then does it take 30-45 days to close? Let’s say you were able to clear the appraisal and buyer investigation contingencies within 17 days and within 21 days your lender runs all the numbers and gives you a “clear to close” which means you’re good to go. You’re good to go but your lender will now need some time to prepare the loan docs which before you sign, it is required that you receive a closing disclosure that gives you a chance to verify all the numbers associated with your loan, such as the purchase price, how much of loan you are getting, how much you’re putting as a down payment, and the different fees and closing costs you will have to pay. The good state of California is protecting you by requiring that you review this closing disclosure before you sign the loan docs and put yourself on the hook for a whole lot of money. Reviewing and signing off on this disclosure can add a few more days time to the process. Another week after the 21 day loan contingency should cover it but why not round up to 30 days to be safe, which used to be the typical timeframe to close before the closing disclosure became required. After the closing disclosure requirement, an extra 15 days was added, which is basically an extra two weeks.
This extra week and now two weeks not only covers the lender’s doc prep and closing disclosure time but also to cover the unexpected. Things always seem to come up that can delay the process. But if everything goes smoothly, it could take less than the 30-45 days that’s typical. In my experience, I’ve had escrows that took from as short as 14 days all the way up to 94 days! So it can really depend and this is how long the closing process can take in the Los Angeles area so if you live somewhere else, it may be different.