How long it takes to get a home is a common question home buyers have.
The problem is there are several different answers to this question.
Depending on your situation you could be in a home in a matter of 4-6 weeks, or it can take 4-6 months.
The good news is that we are going to take a look at the different stages of the home buying process to estimate the time it takes for each one pretty accurately.
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1. Check Your Credit Score (1 day)
When you apply for a home loan your credit rating plays a big role in getting approved. The minimum credit score needed for a mortgage will depend on the type of loan you use.
Conventional financing through a bank or credit union will usually require a 640 credit score. However, there are some mortgage programs for borrowers with low credit scores.
FHA loans may be available with just a 500 credit score with 10% down. If you have at least a 580 credit score you may qualify with just a 3.5% down payment. The low credit and down payment requirements of FHA loans make them a favorite for first-time homebuyers.
You can get a free copy of your credit report once a year at the Government site www.annualcreditreport.com.
Credit score requirements by loan type
- FHA loans – 500 with 10% down, 580+ with 3.5% down
- VA loans – 620, some lenders can go much lower than 620 for VA loans
- USDA loans – 640
- Conventional loan – 620
- Jumbo loan 680-700
2. Determine Your Budget (5 Minutes)
Can you really afford a mortgage? You need to be able to answer this question before speaking to a mortgage lender.
The first thing a lender will look at is your debt-to-income ratio (DTI ratio). Your monthly debt payments, including the mortgage, should not exceed 36% of your gross income.
There are other costs to budget for besides just a principle and interest payment. Unless you have a 20% down payment you can expect to carry private mortgage insurance. You’ll also need to pay for a homeowners insurance policy, property taxes, and HOA fees.
3. Fix Errors and Improve Credit Score (30-60 days)
Once you have your report you should check it for any errors. If you find some, then you will need to dispute the errors with all three credit bureaus, Equifax, Experian, and Transunion. If your credit looks good and your credit scores are good enough to get approved you can skip to the next step.
When you dispute an item on your report the credit bureau will launch an investigation into the validity of the account.
The creditor has 30 days from the date the dispute is opened to supple the credit bureau with the required information. If it is not produced by the deadline, by law the credit bureau must remove the account.
Tips to Raising Your FICO Score
Pay off Credit Card Balances
Credit utilization ratio is the amount of available credit you’re using and it accounts for 30% of your overall score.
For example if you have a card limit of $10,000 and the balance on the card is $6,000 your credit utilization ratio is 60%, which is very high. By paying your card balances to less than 15% of your cards limits your credit score will improve significantly.
Dispute Negative Items
You have a right to dispute anything you want on your credit report. This means even accounts that you believe are accurate can still be disputed with the credit bureaus. Accurate accounts are removed from consumers credit reports all the time.
Remember the creditor has 30 days to respond to the bureau otherwise the account will be deleted. Some collection agencies either can’t verify the information, or don’t have the resources to respond to every dispute.
4. Get Pre-Approved for a Mortgage (1-2 days)
Before you start house hunting you’ll need to get pre-approved for a loan first. Getting pre-approved is actually a very simple and quick process. You should be able to get pre-approved in a matter of hours and at worst a day or two.
Pre-approved is different than pre-qualified. During the pre-approval stage a loan officer will pull a copy of your credit report. They also verify your income and assets using your W2’s, tax returns, bank statements, and pay stubs.
After everything is confirmed you’ll receive a mortgage pre-approval letter stating that you are approved and for how much.
5. Find an Experienced Real Estate Agent (1-7 days)
These days it seems like everyone knows a realtor, but that doesn’t mean you have to use your friend, or your friend’s friend.
Speak to agents on the phone to get a better sense of their communication style. You want to be completely comfortable with your agent, they will be on your side helping you throughout the home buying process.
Some first-time home buyers think they can save money by not using a realtor. However, this is not true, the buyers agent commission is already figured into the sales price. The buyer does not have to pay anything out-of-pocket to their agent.
6. Find a House You Love (1-60 days)
This step is where the timeframe will vary greatly. Some home buyers find a property they want to make an offer on the same day they start looking. Others will weeks, even months to find a home they want to buy. The truth is, you can expect top be somewhere in-between.
In speaking with several real estate brokers and agents the consensus is that is takes around 4-8 weeks on average to find a home and put in an offer.
The quicker you want to buy, the more things you’ll have to compromise. Everyone has certain must haves, such as 3 bedrooms, 2 bathrooms, a garage, large kitchen, etc.
Then you have your preferences like a media room, a dinning room, nice view, a certain neighborhood.
Most likely you are going to have to settle for a home that doesn’t have everything you want, but everything you need.
7. Negotiating the Purchase Price (1-14 days)
When you’ve found a house you want to make an offer on, one of three things can happen.
- The seller accepts your offer and you’re under contract
- The seller declines your offer
- The seller sends you a counter-offer
Obviously, if they accept your first offer then you’re in contract immediately. If the seller declines, or sends a counter-offer you need to continue the negotiating. Hopefully you can agree on a price fairly quickly. However, some buyers find themselves waiting weeks or months while they negotiate.
If you’re buying a short sale you can expect to wait months. The seller has to send your offer to the bank to approved which takes weeks, even months. Try to avoid short sales if you’re trying to get a home quickly.
8. Loan Application and Final Loan Approval (30-60 days)
Now that you’re in a purchase contract it’s time to complete a mortgage loan application and start the loan process.
Your loan officer already has some of the documents needed to get a mortgage from when you were pre-approved.
There are more documents your lender will need throughout the process. Speed up the time it takes to close by responded to your loan officer in a timely manner.
Average Time it Takes to Close on a Mortgage
Ellie Mae has a report showing the amount of time it takes to close on a home from start to finish.
Average closing times by mortgage type
- FHA loans: 46 days
- VA loans: 46 days
- Conventional loans: 43 days
Tips for a Quick Closing
Have Your Documents and Paperwork ahead of Time
Your loan officer is going to need lots of paperwork and documents to complete your loan. Knowing which documents you need for a mortgage and having them ready to hand to your lender along with your loan application will save you a lot of time.
Documents to Gather for Your Mortgage Lender
- Last 2 years of W2’s from all employers
- 3-4 months worth of pay stubs
- Previous 2-3 months of Bank Statements
- Previous 2 years of tax returns
- Signed gift letter (if using gift funds)
- List of your debts and assets
- If renting (get proof from your landlord you have paid your rent on time)
- Profit and loss statements if self-employed
- Signed real estate purchase agreement
- List and proof of any additional income (child support, seasonal jobs, alimony)
- If divorced, get a copy of your divorcee decree
Be Honest about Your Situation
It may seem obvious that you should be upfront and truthful with your loan officer. But some borrowers do stretch the truth, or try to keep things from their lender because they’re afraid of being denied.
This is the worst thing you can possibly do, even if it’s a small thing you think makes no difference, your loan officer needs to know.
Remember your loan officer is working for you, not against you. They want your loan to be approved almost as much as you do, that’s how they earn commissions. By being completely upfront you give your loan officer a chance to solve any potential issues that may derail the loan otherwise.
Don’t Make any Large Purchases or Apply for Credit
A common reason some home buyers end up having their mortgage denied is because they bought a new car or their score dropped because they applied for a bunch of new credit cards or ran up their credit card debt.
Not only does your credit score influence whether or not your loan gets approved, it is directly tied to the interest rate you receive. Wait on buying that new car or any other large purchase until after your loan closes.
What not to do when buying a home
- Apply for any new credit or loans
- Increase the balances on your credit cards
- Be late on making a payment
- Do a balance transfer
- Refinance a loan
Have Your Down Payment Ready to Go
Your lender will need to track where your down payment came from. If it has been siting in your savings account for months then you’re good, you don’t need to do anything.
However, if you’re down payment, or a portion of your down payment is in cash you need to deposit it into the bank asap.
The money should be sitting in your bank account for a few months and you need to prove it with your bank statements. Otherwise the mortgage company can’t track the funds, which will delay the loan.