Sounds easy to ask, doesn’t it? “When can we close?”

Sure, everyone would like to hear, “Oh, just whenever you’re ready!”

The truth? Whether you are a real estate investor looking for a mortgage for acquisition, rehab or construction or you are a homeowner just looking to purchase a home there are a couple of points you need to be aware of when it comes to closing speed and dates for any mortgage loan.

Closings are not demandable even by your real estate agent – a common fallicy among inexperienced agents. Many moving parts are involved in closing on a purchase or a refinance. Pay special attention to the list of items at the end of this article which can cause delays. Take special note to how many of those are under your control or within the control of the lender/broker. The person who will actually be making the final scheduling of your closing will be the lender who will pass that information to the processor who will pass it to the attorney. Real estate agents do not control or have the ability to affect closing dates and times (although some want to force the issue around their schedule it’s actually up to the lender first and you second – I don’t care when you close so long as you close!)

Here is an average sampling of how this works. You’ve already called us and been prequalified – since you know that’s the correct order of things – and now you’re shopping and you’ve found a house.

1. We know the most often required documents so we gather those from you ahead of time.
2. You make an offer on a house.
3. A couple of days later that offer is accepted.
4. Generally, the offer is going to show a closing date 30 days from the day the offer was made. Not from the day it was accepted.
5. You tell us the offer was accepted so we start “start the ball rolling”.
6. An appraisal must be done and this requires an executed sales contract. Sometimes we get that in our office right away, sometimes – for one reason or another – it is delayed. Appraisals take 2 days to a week as a general rule.
7. While we’re waiting on the appraisal we’ll “update your docs” which means we’ll ask for current pay stubs, bank statements, and any other documentation to prove income and assets. If you get those back to us right away there’s no delay. If you drag your feet – there is a delay!
8. We’ll need insurance documentation – this is entirely dependent on the co-operation of your insurance company. As I am writing this our processing department is “having fits” with an insurance company who has held up a closing for over 5 days while we wait on proper documentation. That’s rare, most insurance companies are prompt and professional.
9. Once we have all the required documentation we send the “package” to the underwriter. Underwriting can take as little as one hour and as much as several days. The deciding factor is underwriter workload.
10. The underwriter may ask for additional documentation. If they do you can (a) argue with the processor about having to provide it and end up sending it anyway or (b) get it back in as quickly as possible.
11. Once the underwriter has issued a “Clear To Close” with no further conditions you’re good to go.

Average closing time from application to close? About 14 days industry wide. It can happen in as little as 48 hours but that is rare [edit: since this article was originally published in 2006 new federal regulations have been passed requiring a minimum of 3 business days for the borrower to contemplate the mortgage offer before the lender can proceed which adds a little time to closing].

Lenders and brokers who advertise 24 hour closings are omitting the first 10 steps from above. NOBODY can close a purchase loan in 24 hours from the time your offer was accepted.

Delays in closing can be caused by many things. More often than not delays are caused by one or more of the following:

1. Fully executed contract delayed. This happens more often on foreclosures where the seller is a bank and it takes them a few days to sign the contract and return it.
2. Appraisal coming back with a value lower than the sales price. Very rare but it has happened.
3. Appraisal coming back with “subject to repair” comments which exceed those allowable by the lender.
4. Lack of co-operation from the insurance company. Loss-Payee Clauses are requested in writing and are generally returned within 24 hours. Anything longer is considered a delay.
5. Lack of co-operation from current mortgage company in returning pay-offs or Verification of Mortgage (VOM).
6. Lack of co-operation from employer in returning Verification of Employment (VOE).
7. Income and/or assets on application used for pre-qualification being overstated and not supportable by documentation.
8. Borrower’s earnest money check not being deposited into the Real Estate Broker’s escrow account.
9. Problems with the title to the property – discovery of liens or multiple title changes in short succession.

These are just a few “hiccups” that are fairly commonplace on my side of the desk. The most important thing to remember is that the staff at your mortgage broker or lender is working for you. They don’t get paid unless and until your loan closes. So guess what? That’s right! They really want your loan to close.

It takes dozens, often hundreds, of man-hours to take a loan from application to closing. There are many people involved in the process that you never know exist. Some of them work on commission and only get paid if your loan closes. Others are on salary and of that group some just don’t care.

Most broker’s are very committed to you. I can speak for my own staff and say they definitely take it personally … the good and the bad.

Ken Cook – Georgia – FHA, USDA, VA and Conventional Home Loans (678) 439-8683 NMLS ID 208452 – Originally published in Active Rain on July 24, 2006.