The term “speed of close”—also known as “time to close”—describes the total time it takes to finalize a loan, from a borrower’s initial application submission to the moment the loan funds are disbursed and all closing documents are signed. This metric is essential in real estate and business financing as it determines how soon borrowers can access funds or take ownership of a property.
How Does the Loan Closing Process Work?
Understanding the stages involved helps clarify where time can be saved or lost. Typical steps include:
- Loan Application: Submission of all required financial documents.
- Processing: Loan processor verifies information, orders property appraisal if needed, and prepares the file.
- Underwriting: A risk analyst reviews the borrower’s financial profile and property value, verifying eligibility. Additional documentation may be requested here.
- Clear to Close (CTC): The loan receives final approval signaling the borrower can schedule closing.
- Closing & Funding: Borrower signs the closing documents, pays closing costs, and the lender funds the loan.
The “speed of close” spans from step one through funding completion.
Key Factors That Impact Speed of Close
- Borrower Preparedness: Organized and timely submission of documents like pay stubs, tax returns, and bank statements accelerates the process.
- Lender Efficiency: Lenders with streamlined systems and less backlog close loans faster.
- Loan Type: Conventional loans typically close quicker than government-backed FHA or VA loans due to fewer appraisal and underwriting requirements.
- Third-Party Delays: Appraisers, title companies, and insurance providers involved can add delay. For example, scarce appraisers or title issues may slow closing.
Typical Closing Times
Based on the ICE Mortgage Technology December 2023 Origination Insight Report, average closing times for home loans are:
| Loan Type | Average Closing Time (Days) |
|---|---|
| Conventional Loan | 45 |
| FHA Loan | 48 |
| VA Loan | 51 |
How to Speed Up Your Loan Closing
- Get pre-approved instead of just pre-qualified to start with lender underwriting completed.
- Assemble a loan file with required documents before applying.
- Respond quickly to lender requests.
- Inquire about lenders’ average closing times when comparing options.
- Work with experienced loan officers and real estate agents familiar with efficient closings.
By comprehending the “speed of close” and the steps involved, borrowers can better manage expectations and identify ways to minimize delays. This knowledge is vital for homebuyers and business owners aiming to secure funds or property promptly.
For a comprehensive overview, see our Mortgage Loan Cycle article and Loan Closing Checklist.
Additional Resources:
- Consumer Financial Protection Bureau’s guide on the Mortgage Process
- ICE Mortgage Technology Origination Insight Report
- NerdWallet’s article on How Long It Takes to Close on a House