How long does it take to close on a mortgage loan these days? This is one of the most common questions we receive from home buyers and mortgage shoppers. It seems a lot of folks are concerned with timing — and rightfully so.
According to a recent report, the average time to close on a mortgage loan was 46 days toward the end of 2018. It has remained fairly consistent over the past year or so. The average time to close in 2019 will probably fall within that same range, or perhaps a bit less due to the ongoing digitization of the lending process.
Average Time to Close on a Home Loan: 46 Days
In December 2018, Ellie Mae published its latest “Origination Insight Report” with data through November 2018. It showed that the average time to close among all mortgage loans was 46 days for that month.
Some background might be helpful:
Ellie Mae is a company that provides software and related services to the mortgage lending industry. Their insight reports are based on “application data from a robust sampling of approximately 80 percent of all mortgage applications” that are processed through their software applications. So the insights yielded from these reports give us a pretty good idea of what is happening across the entire industry.
The report that they published in December stated:
“The average time to close increased slightly in November, up one day to 46 days. The average time to close a refinance held at 43 days while the average time to close a purchase increased to 48 days.”
(When averaged and rounded up, those two figures for home buyers and refinancing homeowners result in an average of 46 days for all borrowers.)
In this context, the “time to close” is the length of time between (A) the initial loan application and (B) the actual funding. Mortgage loans are typically funded on, or within a couple days of, the closing date.
Faster for Some, Slower for Others
To be clear, we are talking about the average time to close here. The actual time it takes to close on an individual mortgage loan can vary quite a bit, due to a number of factors.
Some borrowers sail through the mortgage underwriting process, which takes place prior to closing and funding. Other borrowers might encounter some snags along the way.
For example, the underwriter might identify some issues that need to be resolved before the loan can close and be funded. These are commonly referred to as “prior-to-funding” requirements or conditions.
For instance, the underwriter might need the borrower to provide a letter of explanation about a gap in employment, a large bank withdrawal or deposit, etc. Once the issue is resolved to the underwriter’s satisfaction, the loan can move toward closing and funding.
This is why the closing timeframe can vary from one borrower to the next. Still, the average time to close on a mortgage loan during 2018 was around 42 – 46 days. It will probably hover within that range through 2019 as well.
Coming Soon: A More Digitized Mortgage Process?
During 2018, there were a lot of developments in the mortgage lending industry that could reduce the average time to close going forward. The industry is adopting new technologies and procedures that are designed to streamline the overall lending process.
When compared to other industries, the mortgage industry is lagging behind in this kind of digitization. And that’s understandable, when you look at the amount of paperwork and verification that’s required to close a typical home loan. But it will happen, because consumers demand it.
We’re already seeing signs that the industry is moving in that direction. In a July 2018 Forbes article, Aly Yale wrote:
“Thanks to a new strategic partnership, homebuyers in 15 states can now see faster (and fully digital) closings on real estate transactions … digital notary platform Notarize has partnered with Title Resources, a national title company, to offer electronic notarizations to its customers.”
That particular partnership could help pave the way to a 100% digital closing process in those states where it’s available. It might also set a standard for where the industry needs to go.