Inside this article
The USDA loan program is a popular choice for buyers looking to purchase homes in designated rural areas. However, the USDA closing process can be quite different from traditional mortgage closings. In this article, we will explore the timeline of the USDA closing process and discover tips to speed up your journey to homeownership.
How long does a USDA loan take to close?
It generally takes between 30 to 45 days to close on a USDA loan. This USDA closing process begins with the initial contract and extends to the final closing day.
Closing Timeline for USDA Loans
Your closing timeline may vary depending on a variety of factors, but understanding the key stages can help you navigate it more efficiently.
The USDA closing process can be divided into six phases:
| Phase of USDA Closing Process | Approximate Time Frame |
|---|---|
| 1. Purchase Agreement | Varies |
| 2. Appraisal | 1 week |
| 3. Underwriting | 2-7 days |
| 4. RDO Approval | A few days to a week |
| 5. Final Approval | 3+ days |
| 6. Closing | 1 week |
While each of the above phases has its own approximate time frame, keep in mind that some of these phases may overlap. For example, some USDA lenders may complete certain aspects of the underwriting phase while waiting on the home appraisal result.
Phase 1: Purchase Agreement
In this initial phase, the borrower enters into a contract to purchase a home in a designated rural area that meets USDA minimum property requirements. The timeframe for this phase can vary significantly based on location, the housing market or the buyer's resources.
Phase 2: Appraisal
The loan’s underwriter will condition for an appraisal of the property during the underwriting process. Typically, the appraisal takes about a week. However, things like geography, location and the current demand for third-party appraisals in your area can influence the length of your appraisal timeline.
Phase 3: Underwriting
Once the USDA appraisal is complete, the loan proceeds with the underwriting process. Underwriting for USDA loans may sometimes take longer than traditional mortgage loans due to their additional requirements, including the USDA appraisal and approval by the USDA Rural Development Office. You can expect this phase to take anywhere from a few days to a week.
Phase 4: USDA Rural Development Office Approval
One unique aspect of USDA loans is the two-party approval system. Once approved by your USDA lender, the loan must be sent to the state's USDA Rural Development Office (RDO) for final approval. The timeline for RDO approval depends on your specific state, current demand and various aspects of your individual loan. It usually takes a couple days but may turn into a week or more, especially at busier times like after holidays.
Phase 5: Final Approval
The final approval, also known as a "clear to close," is issued once both the lender and the state RDO have approved your loan. The timeframe for USDA final approval can vary but typically only takes a few days.
Phase 6: Closing
Once you receive the clear to close, you can expect to close on your USDA loan within the next few days. This phase involves coordinating with the seller, your USDA lender, real estate agents (if applicable) and other relevant parties to schedule the closing date, time and location.
Speed Up Your USDA Closing Timeline
Due to the more comprehensive underwriting process, USDA loans may sometimes have a longer closing timeline than some traditional mortgages. While this may seem daunting, there are ways to help streamline your USDA closing.
USDA borrowers are more likely to experience a shorter closing timeline if they adhere to the “Four P’s”:
Prompt
Respond promptly to requests from your USDA lender for documentation, appraisal-related inquiries, underwriting results and other essential matters. Quick responses can expedite the lender's part of the process to reduce unnecessary wait times.
Prepared
Minimize delays by gathering all required documentation in advance, preparing for potential obstacles during the appraisal and planning for the possibility of repairs.
Preapproved
Preapproval not only speeds up the USDA loan process but also demonstrates that you are serious about buying a home. After preapproval, avoid making financial changes that could cause delays, such as opening new credit lines, changing jobs, making major purchases or transferring substantial amounts of money between accounts.
Patient
While there are ways to speed up your USDA closing timeline, it's important to remain patient throughout the process. Certain phases may be frustrating at times, but remember that your future home is just on the horizon.
