Once you’ve found your dream home, made an offer, and had that offer accepted, you’ll begin working towards closing. It’s a really exciting time, and many buyers face delays. According to the National Association of REALTORS®, 32% of buyers face delays at closing. These delays can be frustrating when all you want to do is move in.
But there’s good news! You can avoid common hiccups with these steps:
1. Have Cash-on-Hand to Cover Your Deposit and Closing Costs
Conventional wisdom says that you need a 20 percent downpayment to buy a home. But that’s changing. According to SmartAsset, the average first-time homebuyer puts down between 5 and 10 percent. There’s no rule of thumb on what down payment will work best for you. It depends on your individual situation. Always work with a trusted financial adviser when deciding on a downpayment. But however much you decide to put down, be sure to have this money saved up and ready to go when you start looking for your dream home.
Another thing you’ll want to remember to save for? Closing costs. They typically add up to anywhere from 2 to 5 percent of your home’s price. To avoid delays, make sure to have this cash saved and on hand.
When to Do It: When you start your home search
How Long It Takes: A couple of days (assuming you just need to transfer the money into the right account– more if you don’t have the money to cover it)
2. Get Pre-Approved For a Loan
Loan problems can be a major cause of closing delays. In order to help prevent these delays, you’ll want to get pre-approved for a mortgage. While getting pre-approved doesn’t guarantee you’ll get a mortgage, it’ll give you a reliable idea of the mortgage you can get. Imagine finding out you won’t be approved for a mortgage once you’ve made an offer on your dream home. That’s like picking out a puppy, then having to give it back to the shelter once you get to the counter because you forgot to check your bank account.
When to Do It: Before you start looking for a home
How Long It Takes: 1-3 Days
Pro tip: the more underwriting you do upfront, the better your chances to get to the closing table quickly. Two-minute pre-approvals can be a solid first step in the home financing process, but they don’t go far enough. At Eave, we fully underwrite your finances within 24 hours of application. Our Eave Conditional Approval is strong and helps give sellers confidence in your bid.
3. Gather Your Paperwork: Divorce Decree
If you’ve gotten a divorce, you’ll need the paperwork to prove it before you close on a home, along with copies of any child support and alimony documents. If you don’t have copies on hand, you may have to go down to the county clerk’s office to request a copy. Avoid surprises by taking care of this step well ahead of time. You’re going to need it in order to get approved for a mortgage.
When to Do It: At the beginning of your home search
How Long It Takes: A visit to the county clerk or a call to your ex
4. Apply for a Mortgage
You can only officially apply for a mortgage once you’ve found the home of your dreams– because you’re applying for a loan towards a specific property. Once you make an offer, you’ll need to apply for a mortgage and it’ll need to be approved before you can close. The average mortgage takes about 30 days to be approved, but during peak seasons it could take as long as 60 days. (At Eave, we guarantee closing in 21 days or less!)
You can set yourself up for success here by making sure you have copies of any necessary financial documents– like W-2s and potentially tax returns– on hand before you apply.
When to Do It: After you’ve made an offer
How Long It Takes: average 30 days (but could be up to 60 days)
5. Look Out for Accurate Home Appraisals
Another cause for delay can arise if the seller has listed the home’s value at a higher price than your lender says its worth. Before your lender doles out the mortgage, they want to make sure the home is actually worth that value. According to the National Association of Realtors, appraisal issues are responsible for 20 percent of closing delays.
While you can’t totally control this, there are ways to set yourself up for success. Do your own research on the pricing trends of neighborhoods where you’re looking. If you have a solid sense of the neighborhood, you’ll be able to identify potential red flags. Arm yourself with a real estate agent you can trust. Ask about any past appraisals on the home. When was the last one done? How does it compare to the current home value? Were any major renovations done since that time?
When It Happens: Appraisals happen after an inspector has looked at the home
How Long It Takes: The final appraisal report comes in 3-7 days after inspection
6. Practice Patience with the Good Kind of Delays
It’s possible that during the home inspection, you may discover damage to the home. While this can feel really disappointing, there’s a reason an inspection happens before you sign on the dotted line. You want to know about any damage before you buy. Smaller repairs will need to be made. Insect infestations and water damage will need to be remedied, or they may indicate that you’ll face very expensive issues down the road. Taking the time to identify and remedy these issues before you close can save you a lot of pain in the long run.
When It Happens: After the home inspection
How Long It Takes: Depends on the repair. Could be a day, a week, two weeks.