How long after the appraisal can a mortgage close?

If you’ve made an offer on a home, you may wonder how long you have to wait from the appraisal to closing.

If all goes well, the homebuying process — including getting a home appraised and obtaining final financing approval from your lender — can take about 30 to 45 days. But in cases where the appraisal finds problems with the property that need to be fixed before it can be eligible for a loan, you may need to add extra time for corrections or repairs. In such cases it’s safe to assume your loan closing might be delayed.

Keep in mind that while an appraisal may spot some defects, it’s not as comprehensive as a home inspection. Regardless of the outcome of the appraisal, you should have the property inspected so you have a more fully informed idea of its condition before you decide whether to close the deal on the home.

• What is an appraisal?
• What happens if the home does not pass the appraisal?
• What happens if the closing date is delayed?
• Appraisal vs. home inspection

What is an appraisal?

An appraisal is an evaluation of a home’s market value by a professional. Lenders typically require appraisals to verify that the amount you want to borrow makes sense compared to the property’s value. An appraisal gives a lender some assurance that if the borrower can’t pay the loan, selling the home would raise enough money to cover the lender’s potential loss.

For a loan that’s issued through a government program, such as an FHA loan or a USDA loan, the appraisal also verifies that the home meets minimum standards set by the federal government and legally qualifies for the loan.

What to expect from an appraisal

An appraiser may review the exterior and interior of the home, taking photos and recording information about the state of the property. The appraiser also observes features of the neighborhood, such as nearby buildings, parks or roadways.

The appraiser looks at the sale prices of similar properties and uses that data, along with observations of the home, to reach a conclusion about what they think the home is worth. Then they typically present their findings to the lender, and the borrower also gets a copy.

Typically, the borrower pays for the appraisal.

The timing of the appraisal and the closing date

The length of time from an appraisal to closing can vary. While mortgage timelines can differ based on individual situations, some lenders estimate that this period typically takes about 30 to 45 days.

If the process takes longer than that, the mortgage lender may still accept the appraisal for some time. The exact period that the appraisal is good for depends on the type of loan.

• Conventional loans — Lenders for conventional loans often consider home appraisals valid for 120 days. For mortgages that are bought by Fannie Mae or Freddie Mac, appraisals are good for 12 months, but an appraisal update is needed after four months.
• FHA loans — An appraisal is valid for 120 days for an FHA loan, though this window can be extended by 30 days in some circumstances.
• USDA loans — For USDA loans, an appraisal is good for 150 days, or 240 days if it’s updated.
• VA loans — After an appraisal is conducted for a VA loan, the VA creates a Notice of Value reflecting the appraisal’s findings. This notice is valid for six months, and this period can sometimes be extended.

What happens if the home does not pass the appraisal?

After an appraisal, you may learn that the appraised value of the home is lower than the sale price of the home. In these cases, you may wish to dispute the appraisal. To do this, your real estate agent offers evidence on sales prices for comparable homes and tries to persuade the lender that the home is worth more than what it was appraised for.

You can also go back to the seller and try to renegotiate the price of the home. Or you can pay out of pocket to make up for the shortfall from the price. This may involve taking on higher risk. If the appraised value is well below the sale price, you may be better off not buying the home.

A home can fail an appraisal if it doesn’t meet the standards for the loan. In this case, the lender may decide that problems with the home’s condition are too extensive to repair and may reject the home.

Otherwise, the lender can require repairs that must be completed before the loan can be approved. After repairs are made, there may need to be a compliance inspection to verify that the issues have been corrected.

Appraisal fees are owed no matter what the outcome of the appraisal is. That’s because the fee pays for the service of examining the house and doing research.

What happens if the closing date is delayed?

If your closing date is postponed and you have a rate lock, you’ll need to check how long your lock lasts. Generally, rate locks are set for 30 to 60 days from the date you made your offer. A delay that pushes the closing date past this deadline could cause you to lose your rate lock, meaning the interest rate on your loan could end up being different from what you were originally offered. You could also lose the fee you paid to lock in your rate.

You may be able to pay your lender to extend the rate lock if it looks like you’re going to miss the expiration date. Fees vary by lenders and often depend on the length of the extension. You may be charged in the range of 0.125% to 0.625% of the amount of your loan for an extension from seven to 30 days.

Letting your rate lock expire will likely mean you’re charged the current market interest rate at the time you close on the loan. This could work out in your favor if rates go down by the closing date. But if rates increase, your loan will likely be costlier.

Appraisal vs. home inspection

Appraisals and home inspections serve different purposes, and it’s best to do both before taking out a home loan. While an appraisal provides information about the property’s value that the lender needs before deciding to issue a loan, a home inspection offers a more detailed look at the home’s condition and gives homebuyers a heads up about defects that might require a lot of work down the road.

It’s a good idea to have a contingency in your offer so that if an inspection reveals anything worrisome, you can choose to renegotiate the price, have the seller make repairs, or back out of buying the home.

What’s next?

After successfully completing an appraisal and home inspection, it’s time to get ready for closing. You may be able to save money on some closing services by comparing prices among different providers. Look at section C on the second page of your loan estimate to find out which services you can get quotes for. You can get a list of providers from your lender, or you can search for companies yourself.

You’ll also need to think about the schedule of your closing date. Ask for copies of your closing documents, including the closing disclosure, promissory note, mortgage and deed, at least three business days before closing.

Take some time to read these documents. You may want to ask your lender about any details you’re unsure of, or possibly consult with an attorney. It’s a good idea to check the information against your loan estimate to make sure you don’t miss any important changes.

Want to learn more? Check out some of our top mortgage lenders for first-time homebuyers.

• Homebridge Mortgage: Homebridge offers resources that specifically cater to first-time homebuyers.
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