When you are buying a new home, it is understandable to be excited. You likely want to move into your new house as soon as possible! However, before you begin the buying process, it is important to know how your decisions can affect your mortgage closing timeline. The typical mortgage closing timeline is about 30–45 days, and People Driven Credit Union can help you get the best possible rate.
Types of Financing
Before we get too deep into the different factors that can impact your homebuying process, here is a quick explanation of a few of the different financing options.
Fixed Rate Mortgage
The easiest type of mortgage to understand is the fixed rate mortgage. When you obtain your loan, you agree on a rate, and that is what you will pay for the duration of the loan. Simple as that.
Adjustable Rate Mortgage
A more complex form of home financing is an Adjustable Rate Mortgage, or an ARM loan. In the most basic terms, you will pay one rate for an introductory period of time, and then the rate will change in intervals after that.
How this typically works is that you will be locked in for a lower rate at the beginning, and then your rates will go up or down depending on various economic market factors. At People Driven Credit Union, we offer both a 7/1 and 10/10 ARM loan, meaning you have a fixed rate for seven years and then adjust annually after that, or you have a fixed rate for ten years that adjusts every ten years after that.
There is risk in this style of mortgage. You could end up paying significantly more once the rate adjusts. However, there is also the chance that you may save a significant amount of money if your rate adjusts in a favorable market. Therefore, this type of loan is often a good choice if you anticipate any changes in your lifestyle; for example, if you only intend to stay in the house for a few years, or if you anticipate an increase in your income.
ARM loans can also be useful for securing a larger loan amount than a fixed-rate mortgage, allowing you to make a purchase in a hot market or on a bigger home.
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Federal Housing Administration (FHA) and Veterans Affairs (VA)
There are a few government programs (most notably the FHA and VA) that are meant to boost the economy by helping aid the home buying process for certain groups.
The FHA does not directly provide anything to the home buyer; instead, it offers insurance for the lender, which lowers their risk. This means that a financial institution will be able to offer FHA-protected loans to people with less-than-perfect credit, or those with low-to-moderate income who do not have the money on hand for a large down payment.
The Department of Veterans Affairs offers advantageous loans to veterans, active-duty service members, and eligible surviving spouses. Their goal is to reward those who have served their country with favorable terms and competitive interest rates, making home ownership more feasible.
There are also non-governmental options to financially aid in the home buying process: People Driven Credit Union’s Zero Down Mortgage, for example, which can offer qualified borrowers the opportunity to fully finance the cost of their primary residence without any down payment.
Cash
While this option may feel out of reach for the average homebuyer, it is an option to purchase a home directly with cash, sidestepping the mortgage process entirely. Obviously, this requires a significant amount of capital, but can result in savings without the need for interest-laden loans.
Factors That Can Speed Up or Slow Down Closing
The typical mortgage closing timeline is about 30–45 days; however, there are a handful of factors that can increase or decrease that estimate.
Pre-Approval and Type of Financing
One major factor in your closing timeline is the way in which you are getting the funds to buy your house.
The quickest closing comes with all-cash purchases, as cutting out any type of financial institution speeds up the process significantly. If you have enough cash on hand to purchase a home outright, it can take just 7–21 days to finish the deal.
However, that is not the case for the vast majority of home buyers. Most people will need to rely on a bank or credit union to secure a loan to have the capital required for such a large purchase. With fixed-rate and ARM loans being the most common, their timeline of 30–45 days becomes the national average.
While a loan through the VA or FHA can result in a more advantageous financial deal, the downside is that getting the government involved in the home buying process will slow things down, taking an average of 45–60 days to close on a home.
No matter which type of loan you have, getting pre-approved can speed up the process significantly. Rather than beginning the process of acquiring a loan from your financial institution in the midst of your homebuying journey, starting with that step means less waiting around once you have made the decision to buy.
Inspections and Property Issues
Inspecting your new home can be a significant time investment. While the inspection itself will only take a few hours, scheduling and waiting for your preferred inspector can take some time. If the inspector points out any flaws in the home, that can really throw a wrench into your timeline; you may need the seller to make repairs on the property before continuing with the purchase.
It may seem tempting to skip an inspection to drastically speed up your mortgage acquisition, but spending that time is incredibly advantageous for the buyer, safeguarding you against major defects that could cause massive expenditures in the future. Although it may take less time to have a real estate agent set up an inspection for you, you will often be better off choosing an inspector that is independent and does not have personal or business ties to the seller or the financial institutions involved. This ensures that you have the fairest possible deal.
Taking Title
As you buy a house, a key step in the process is transferring the ownership from the previous owner onto you, also known as “taking title”. However, before you sign on the dotted line, you should be sure to have someone perform something called a title search.
While most title searches will come up without incident, there are situations where the previous owner knowingly or unknowingly broke the chain of title. This could be because a previous owner sold the property without knowing the house was part of a will, or it could be because a lien was put on the home for one reason or another at an earlier time.
Whatever the reason, if a title search brings up any sort of issue, it will add some extra time to your closing timeline.
Market Speed
Even though it can be tough to plan, the time at which you are buying a home can impact the speed of closing.
If the housing market is booming, it may take longer, as the owner is likely fielding various offers and the real estate professionals involved are working on many cases at once. Conversely, if there is a lull in the market, you may be able to close faster.
As a rule of thumb, the fall and winter months are typically the “golden” time to buy, with prices and timelines both shifting in favor of the buyer.
Selling a Prior Home
Perhaps the biggest variable in the home buying process depends on if you are engaged on the other end of the spectrum: the home selling process.
If you have a significant amount of your net worth tied up in your current home, freeing up those funds before you purchase your next home may be a necessary step. However, if the sale of the first house gets slowed down for any of the reasons listed above, that can also slow down the process of closing on your next home.
To ensure your home buying experience is as smooth as possible, reach out to a People Driven Credit Union representative either at your local branch or by calling at 248-263-4100 to get the process started.
FAQs
Who is People Driven Credit Union’s Mortgage Specialist?
Michelle Dzon is authorized to act as an agent on behalf of People Driven Credit Union. Contact her for personalized assistance with your mortgage needs.
michelle.dzon@memberfirstmortgage.com
616-301-1714 | NMLS ID: #401292
What mortgage products are available?
People Driven Credit Union offers the following mortgage products. Conventional Products: Freddie Mac Fixed Rate, Fannie Mae Fixed Rate, Adjustable-Rate Mortgages, Home Possible (Freddie Mac), Home Ready (Fannie Mae), Construction, Super Conforming. Government Products: FHA, VA, RD/USDA.
What documents do I need for a mortgage?
You will need a copy of your driver’s license, your last two years’ W-2s, most recent 30-day span of paystubs, last two years’ Federal Tax Returns, most recent two months’ bank statements, and contact information for your homeowner’s insurance agent.
