If you have not bought or sold a home in the current millennium, you may still think that escrow takes about 30 days. 30 day escrows are a thing of the past. Let me just say that I closed a couple of cash transactions in this past year that took about 15 days to close even with home inspections. When there is a mortgage involved, the average has been closer to 40 days.
That all just changed now. It takes longer. Now it takes 45 to 60 days to close on a home with a mortgage. As of October 3rd, a Truth-in-Lending Disclosure referred to as the TRID, was implemented that will take home loans longer to close. There are also things that can happen during the loan process that will cause further delays and push closing out even further. This will affect refinances as well as purchases.
As a buyer, soon after application is made you are going to want to lock in an interest rate. Interest rate locks are normally for 30 or 45 days. Now we are going to see a lot more 60 day locks. Interest locks cost money. The longer the lock, the more it costs. Lock extensions even cost more money. The only other option is for the buyer to delay locking the interest rate and taking the gamble that there won’t be a rate increase.
Many things need to happen during escrow and most of them need to happen in a particular order. This is why it is imperative that all these events take place in a timely fashion without delays. A 2 day delay early on in the process will likely result in a close that is 2 days later.
To start, the buyer needs to be pre-approved by a lender, for the subject property, at the offered price before the offer is ever made. Most of us have heard the term pre-qualified. There is a difference between a pre-approval and a pre-qualification.
After the offer is accepted there will likely be a home inspection performed by a licensed home inspector. Using the default time line in the contract, it could take 20 days or more to satisfy this contingency. There may also be needed repairs that resulted from the home inspection. Only after the home inspection is satisfied, the lender will order the appraisal. It may take a week to get an appraiser out to the house.
In addition to the home inspection, there may be a well inspection and a septic inspection. There may also be a need to review the home owners’ association and the covenants. There are some circumstances where the lender will require a road maintenance agreement. A deceased seller will add time to the process. A power of attorney or and out of area signing can also add time to escrow. If there is a divorce or change of marital status, a quitclaim deeds will be required.
Not all loan programs were created equal. Loan programs very on closing times. It is important that both buyers and sellers become educated before beginning the process. Above are some highlighted links to click on and learn more. It is also important to find a knowledgeable Realtor and lender that you can trust.
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