We receive a lot of FHA-related questions by email that start with the words “how long.” How long does it take to get approved for an FHA loan? How long do they take to close? And so on. So I thought it might be helpful to compile a few of those FAQs onto one page.
Briefly: There are many variables that can determine how long it takes to close on an FHA loan. Underwriting is one of the biggest variables. Once you’ve found a home and signed a contract with the seller, the rest of the lending process might take two or three weeks on the short end, or two to three months on the long end. There are many variables and several different people involved. So the total processing time can vary.
When buying a home, one of the biggest questions on your mind is likely “When will I get the keys?” No one wants to endure a lengthy mortgage process, anxiously awaiting the day they can finally move in.
If you’re considering an FHA loan, you may be wondering if it will drag out your closing timeline compared to other financing options FHA loans are extremely popular, especially among first-time homebuyers But do they really take longer to close than conventional mortgages?
I’ve purchased homes with both FHA and conventional loans. Based on my personal experience and research FHA loans can add a few extra weeks to the closing process in some cases. However, it’s not always a significant difference. Here’s a detailed look at FHA closing timelines and how they stack up against other loans.
What is an FHA Loan?
FHA loans are government-insured mortgages backed by the Federal Housing Administration Their primary appeal is that they require lower down payments and credit scores than conventional loans
Borrowers only need a 3.5% down payment on an FHA loan. And minimum credit scores start around 580. With a conventional mortgage, you’ll typically need a 20% down payment and a credit score of at least 620.
FHA loans also allow gifts from family members to cover the down payment. And they are more forgiving of past credit issues like bankruptcy or foreclosure.
This increased flexibility makes FHA mortgages extremely popular with first-time buyers and those with limited funds or less-than-perfect credit. According to the Mortgage Bankers Association, FHA loans accounted for 16.4% of all mortgage originations in 2020.
Average Closing Timeline for FHA Loans
So how long does the average FHA loan take from start to finish?
According to data from the Federal Housing Administration, it takes approximately:
- 44 days to close an FHA purchase loan
- 48 days to close an FHA refinance
The purchase timeline is very similar to conventional mortgages, which take around 45-50 days on average.
However, conventional refinances are often quicker, averaging 30-45 days. So FHA refinances tend to take a little longer than comparable conventional loans.
While these are the typical averages reported, actual timelines can range significantly based on your specific loan and circumstances. On the quick side, FHA loans can close in as little as 2-3 weeks if everything progresses smoothly and efficiently.
On the longer end, it may take 2-3 months in more complex cases. The most important factors impacting FHA closing times include:
- Efficiency of the lender/underwriter
- Required home repairs
- Credit/income fluctuations
- Shopping lenders excessively
- Delays with appraisal or inspection
So while FHA loans don’t necessarily always take longer, they are prone to getting held up at certain points that conventional loans may not.
FHA Loan Process Step-by-Step
To understand where potential delays happen, let’s look at what’s involved from start to finish in a typical FHA loan:
Loan Application & Documentation
You’ll complete your loan application and submit documents like bank statements, tax returns, and pay stubs. Having organized records helps this go smoothly.
Processing & Underwriting
The lender reviews your application and documentation. It then goes through underwriting, where the underwriter verifies you meet FHA requirements. Issues here can slow things down.
Appraisal
An FHA appraiser will visit the home to ensure it meets property standards and establish value. Low appraisals may require renegotiation.
Final Approval
The underwriter gives the official thumbs up after the appraisal comes back acceptable.
Closing Disclosures
Your closing disclosures are prepared 3 days before closing. Review them closely for errors.
Closing
You sign final paperwork and get the keys! Funding may take an extra day.
Why FHA Loans Can Take Longer to Close
While not a guarantee, here are some of the primary reasons an FHA loan may have an extended timeline:
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Extra processing steps – Additional paperwork and requirements can add time in underwriting.
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Strict appraisal rules – FHA appraisals are more rigorous than conventional ones. Deficiencies can delay approval.
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Required repairs – FHA requires all safety hazards to be fixed before closing. Negotiations over who pays can hold things up.
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Lower lender efficiency – Lenders inexperienced with FHA loans often take longer to process them.
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Credit/income changes – Fluctuations during underwriting may require extra documentation to re-verify eligibility.
Basically, the unique rules and regulations of FHA loans open them up to potential slow downs that conventional mortgages may avoid.
Tips for Speeding Up an FHA Closing
Because FHA loans come with inherent closing delays, here are some tips to expedite the process:
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Shop experienced lenders – Those with high FHA loan volume can close quicker.
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Get pre-approved – This shows sellers you can move quickly and gets paperwork done upfront.
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Organize documents – Prevent underwriting delays by having all needed paperwork ready.
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Do inspections early – Line up appraiser and home inspector beforehand so you’re not waiting weeks during underwriting.
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Stay in close contact – Frequent communication with your lender prevents surprises.
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Maintain financial stability – Don’t change jobs or open new accounts mid-process.
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Plan for a longer close – Build some buffer into the contract, especially if repairs are needed.
While FHA loans may not always take longer, being aware of potential delays and taking proactive steps will ensure as quick and smooth of a closing as possible.
Should Potential Delays Deter Me From an FHA Loan?
At the end of the day, FHA loans are still an excellent financing option for many buyers. Their flexibility and low down payment requirements make them ideal for those who may not qualify for a conventional mortgage.
While you may endure a few extra weeks in the closing process, for most homebuyers the benefits of an FHA loan far outweigh a slightly longer timeline.
The best approach is to educate yourself on what’s involved, including potential delays, and prepare accordingly. Finding an experienced FHA lender, getting pre-approved early, and maintaining constant contact sets you up for success, even if your timeline runs a little over.
With the right expectations and diligence, securing an FHA loan can be a smooth and relatively quick process. The reward of finally getting the keys to your new home makes the extra effort well worth it.
What About the Appraisal?
FHA appraisals are a bit different from “regular” appraisals for conventional loans. That’s because the appraiser performs double duty. He must inspect the property for health-and-safety issues, as well as determining the market value. (See: FHA appraisal guidelines and process)
So, how long does the FHA appraisal process take? Here, there are less variables to deal with. The process is fairly straightforward. The appraiser will visit the property to view it in person, which should only take one day. He will also evaluate recent sales in the area, which can also be done in a day or two. He may visit some of the comparable homes for sale in the area, or homes that have sold recently. This can be done the same day as the visit to the subject house (the one being purchased).
Based on all of this research, he will issue an appraised value for the house. He will also prepare an appraisal report, which might take one day or several days, depending on workload. The appraisal report will be sent to the lender for review. So the entire appraisal process, including paperwork, can be completed in less than a week.
How Long for an FHA Loan to Close?
Question #1: How long does it take for an FHA to close?
If you’re talking about the entire process from loan application to final approval and closing, there are dozens of variables. So it’s hard to assign an exact length of time to the process. But let’s try anyway.
Recent reports from ICE Mortgage Technology showed that it takes FHA loans about 54 days to close, on average. That’s based on the length of time between the application and the final funding of the loan.
Much will depend on the house-hunting process. Some borrowers apply for an FHA loan before they have found a house, meaning they get pre-approved first and then start shopping for a home. This is a wise strategy, actually, because it makes sellers more inclined to accept your offer.
The underwriting stage can vary widely from one borrower to another. It can smooth and quick, or it can be riddled with “conditions” that require extra steps from the borrower. It’s an important part of the process, so I’ve addressed it separately in the next section.
How long it takes your FHA loan to close will also depend on how efficient the loan officer, processor, and underwriter are. The mortgage industry is like any other industry in this regard — there are quick people and slow people.
According to Claudia Gravelle, a loan officer at Diversified Capital:
She added that her company can get a final approval in as little as two weeks, as long as the file is complete. But there’s that critical underwriting process again. Ms. Gravelle’s estimate assumes that the loan has already been underwritten without raising any red flags. And that leads us to the next frequently asked question…
how long for an fha streamline refinance to close
FAQ
How long do FHA loans take to close?
Are FHA loans harder to close?
But the minimum standards for a home’s condition are stricter for an FHA loan, Yates said. Sellers will have to make the repairs necessary to meet these minimum standards before the sale can close. This can scare some sellers away from FHA buyers, especially when they have more than one offer on their residences.
How fast is an FHA loan approved?
FHA loan approval usually takes around 30 to 60 days, depending on how fast you provide required documents and how busy the lender is.Sep 13, 2024
How much longer after appraisal for FHA loan to close?
The time it takes to close on a house after an appraisal varies. Usually, the FHA loan process takes anywhere between 30 – 60 days.Apr 8, 2024