Why it Might Take Longer for Your Mortgage to Close, And Why You Should Plan in Advance

Mortgage closings can be delayed at a time when home loan volume is high, such as it is during the continuing pandemic. So, you might want to plan for that possibility in advance. 

For example, you may need to secure backup housing in the event of a delay or pay more money to extend your rate lock. Ultimately, the more prepared and flexible you are, the less stressful the potential of a lengthy closing will be. 

That’s why taking action today is crucial, whether you want to refinance and reduce your mortgage payment or you’re ready to purchase a new home.

The process of closing on a mortgage takes time

Not only does your lender need to first review the documentation you provide, but your loan then needs to go through underwriting so an expert can verify that your financial data is acceptable.  

Before you can close on a mortgage, your lender also will have to complete a title search to ensure that the home you want to buy is free and clear of liens or anything else that could compromise its sale. In addition, the home will need to be appraised to ensure that it’s worth enough to cover the mortgage amount in question.

All of these steps mean a mortgage won’t close overnight. But in some cases, it’s more than feasible for a home loan to close in 30 days. That wasn’t the case this past November, though. The average amount of time it took to close on a mortgage was 55 days, according to Ellie Mae’s Origination Insight Report. That’s one day longer than it took in October, on average, meaning many buyers may have been subject to delays.

Why delayed mortgage closings are problematic

The longer it takes to close on your mortgage, the longer you’ll have to wait to move into your new home. That could be an issue if you’re nearing the end of a lease or have another reason why you need to move sooner. For instance, if you’re relocating for a job that you’re set to start in a month, but it takes 55 days to close on your mortgage, you’ll either need to push out your start date or find temporary housing until your loan is complete and you can actually take possession of your new home.

A delayed closing also could put you at risk of losing out on the mortgage interest rate you lock in initially. You can generally pay a small fee to lock in your rate for a preset period of time—you might get a 30-day lock, a 45-day lock, or longer. But if your rate lock expires before your loan is finalized, you could get stuck paying a higher amount of interest on your mortgage, or have to pay another fee to extend your rate lock.

What to do if your mortgage closing is delayed

A big reason why mortgages have been delayed lately is volume. Low-interest rates are fueling demand for new home purchases and refinance, you’re your mortgage lender likely is busier than ever before. If your mortgage closing is delayed on your lender’s end, there’s probably not much you can do. 

But you can help move the process along by promptly providing all of the information your lender asks for, both at the time of your application and throughout the process. Your lender might decide it needs additional verification that you’re gainfully employed, for example, even if you provided a few months of paystubs along with your application. The sooner you submit that information, the quicker your loan can be completed.

Sign up to get “My Two Cents.” It’s a blog where I share my thoughts on everything related to real estate finance.