How Long Does It Take to Close on a House With an FHA Loan?
When you buy or refinance a home with a loan back by the Federal Housing Administration (FHA), it usually takes between 30 and 60 days for the loan to close. The processing time varies depending on a variety of factors, including the complexity of your application, the condition of the property being financed and the work volume of the loan underwriters.
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Borrower Information
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When you apply for an FHA-insured loan, you must provide the lender with evidence of income, such as your most recent pay slips as well as your last two years' W-2s, or your tax returns if you are self-employed. You must also prove that you have sufficient funds on hand to cover the down payment and closing costs; to establish this, the lender requires two months of bank statements. If a relative intends to "gift" you money to use for a down payment, then you need a letter from that relative stating that the funds are a gift and not a loan. You also need to provide the lender with a copy of the check used to transfer funds to your account. If you fail to provide the lender with any of this information at the time of application, it could cause delays in the underwriting process.
Appraisal
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The FHA only accepts home appraisals that are performed by certified FHA appraisers. These individuals conduct more thorough home inspections than regular appraisers, including in their reports details of any safety hazards, such as issues with non-working utilities, limited road access or broken appliances. The seller must make arrangements to rectify any issues highlighted by the appraiser before you can complete the loan process. Major issues, such as a roof replacement, could drastically slow down the entire loan process.
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Credit
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When you apply for an FHA loan, the lender checks your credit report, and you must provide the lender with a written explanation of any recent inquiries on your credit report. Lenders do not want to approve loans if it appears that you are taking on new credit with another lender, as additional debt could cause your debt-to-income ratio to exceed acceptable limits. The need to explain recent inquiries could delay the underwriting process, especially if multiple inquiries show up on the report because you shopped around for mortgage rates from several lenders.
Time Issues
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Your initial approval for an FHA loan only remains in effect for between 30 and 45 days. If you experience delays during the mortgage process due to necessary home repairs or other issues, your approval may expire. When this occurs, the lender checks your credit again, and you have to provide the lender with updated bank statements and income verification. It can then take a few weeks for the lender to re-approve you as the whole process, bar the appraisal, must start again.
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