Report: Mortgages Closing Faster in 2019

If you’re planning on buying a house this year, here’s a bit of bright news regarding the transaction that lies ahead: it may take 11 less days to step foot into your new home.

According to a recent report from LendingTree, in most cases, the closing process is getting shorter. The lengthy legal process that is needed to verify the information the buyer and seller committed to in the sales contract has now gotten shorter thanks to the digitization of many steps of the mortgage process, such as eSignatures and the exchange of cloud-based documents.

What else is helping borrowers close faster? Better credit scores and loan-to-value ratios. Consider these findings from LendingTree’s three-year study of closing times:

- The time to close on new purchase transactions has been steadily declining, from 74 days in 2017 to 51 days in 2018 and just 40 days thus far in 2019.
- For refinances, the decline has been less dramatic: from 55 days in 2017 to 43 days in 2018 and just 38 days so far in 2019.
- Some of the decline can be attributed to lower mortgage volumes, as refinancings have been on a downward trend. But increased digitization is also playing a major role.
- Closing times vary based on the characteristics of the mortgage type and borrower. Having a higher credit score can knock a few days off: Purchase borrowers with scores above 760 averaged 38 days in 2019 compared with 45 days for those below 720. Refinancings did not show much variation by credit score.
- Loan-to-value ratios below 80 percent had shorter closing times for refinances, at 37 days compared with 42 days on mortgages with a ratio above 95 percent in 2019.
- Loan amounts also affect closing times, with lower amounts, perhaps surprisingly, taking the most time. Loans under $150,000 averaged 47 days compared with 39 days for those above the conforming limit ($484,350 in 2019). Why? Higher loan amounts are typically being made to more credit-worthy borrowers. Lower-priced homes may be in some form of distress or have some type of damage; thus, lenders may require more extensive appraisals to better estimate the home’s value, and this adds time to the process.

No matter what the particulars of your situation may be, here are some ways to ensure a smooth closing:

Have cash on hand. You will have some closing costs that need to be paid in cash, so make sure this cash is easily accessible well ahead of closing. You should also have extra cash, as some final costs may come in higher than initial estimates. An additional 10 percent would be a good buffer.

Bring all necessary documentation. Make sure to prepare all the documentation that you are responsible for providing. Your lender and real estate agent should provide you with a checklist.

Don’t take on new debt. Your approval was based on your credit profile at the time you signed the home purchase agreement. New loans can throw this off, so don’t make any large purchases—like new furniture or a car—until after you’ve closed on your home. Also, continue to pay all your obligations on time.

Make sure the inspection is all set. Make sure you are happy with the inspection and resolve any issues with the seller that you need them to address. Once closing is done, you may not have any recourse for any lingering issues not agreed upon.

Copyright© 2021 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission.