USDA Closing Process and Timeline
Considering a USDA-approved home purchase? If so, you may wonder how long it takes for a USDA loan to close. “Closing” refers to the official date when property ownership transfers from a seller to a buyer. Buyers and sellers sign documents, transfer funds, and exchange keys on closing day.
The USDA loan process timeline can vary depending on different factors, but in most cases, you can expect it to span 30 to 45 days.
If you want to keep the USDA loan approval and closing process moving smoothly and improve your homeownership chances, this handy guide can show you how.
In general, USDA financing takes one month to six weeks to close.
“In my experience dealing with USDA loans, they typically take a bit longer than most other mortgage loan types because the USDA has to do a separate final approval on the loan after the lender approves,” explains Matt Schwartz, founding partner of the VA Loan Network and a lending professional with Southlake Loans. “On average, count on up to 45 days from start to finish.”
Dennis Shirshikov, a finance and economics professor at Queens College, City University of New York, says this timeline can stretch to 60 days in some scenarios.
“Borrowers who use lenders with experience in processing USDA loans usually see faster turnaround times. I’ve heard of these loans closing in less than 30 days because the lender used a streamlined system and worked closely with the USDA office. The right lender can make a big difference here,” he says.
Personal finance expert Andrew Lokenauth recently worked with a client who was able to close on his USDA loan in 35 days.
“That’s pretty fast, considering that the two-step approval process can add around five to 10 business days to your timeline,” Lokenauth says, “but don’t let that discourage you — the benefits of a USDA loan, including no down payment or private mortgage insurance required, usually outweigh this slight delay.”
Here’s a rundown of the different steps involved in this process:
First, shop around among USDA lenders and get loan preapproval, which involves submitting important financial information to the lender such as your earnings, debts, assets, and credit history. The lender will perform a soft inquiry on your credit to determine whether or not you meet USDA loan qualifications. If you meet the qualifications, you’ll get a preapproval letter, which solidifies your status as a creditworthy buyer when you’re ready to make an offer to a seller.
Technically, the clock won’t start ticking on your closing timeline until after you pick a residence and make an offer on a home. You can stay within this timeline by hunting for a USDA-qualified property, submitting an offer, and using your preapproval letter to show proof of your creditworthiness. After negotiations, the seller will hopefully accept and the home will go under contract.
Once your offer gets the thumbs up, it’s time to officially submit a mortgage application with your chosen lender. Afterward, you’ll receive disclosure paperwork you’ll need to review and sign, which marks the official start of the loan process.
The lender will order a USDA appraisal to validate the property’s fair market value and to ensure it conforms to USDA standards. Concurrently, you can schedule an optional home inspection — a smart strategy to ensure the home doesn’t have any major issues the appraiser might not review. An inspector will do a more in-depth canvass of a home’s systems and major components than an appraiser. Getting an inspection can save you money or help you decide to walk away from a home with major problems.
Following the appraisal, your lender’s underwriting experts will scrutinize your complete loan file, including details about the property and your financial info. Prepare to submit extra documentation if requested, such as W-2 and 1099 forms, pay stubs, Social Security award letters, or other documents. Once your lender is satisfied, your file will be sent to the USDA for final inspection.
The USDA will conduct a separate examination of your loan file. The length of time this step will take depends on how busy the USDA office is in your state.
Once you get the green light from your lender and the USDA, your lender will schedule your closing date. On closing day, you’ll sign required paperwork and pay your USDA loan closing costs. Your funds will be dispersed (on the same day or perhaps the next day), and you are free to take possession of the property.
Though it may seem as if your loan’s fate is in the lender’s hands, you can speed up the USDA loan closing process. Read on to learn what you can do to help move it along.
Compile the documents your lender requests to ensure a smoother experience. You can ask your lender what they need, but here’s a checklist of common required documents:
| Document Category | Documents Needed |
|---|---|
| Proof of income* | To verify income, you'll need to provide pay stubs from the last 30 days, W-2 forms from the past two years, and federal tax returns (Form 1040) from the last two years. If you're self-employed, you'll also need to submit profit and loss statements, 1099 forms, and business tax returns if applicable. Additionally, be prepared to provide documentation for any other sources of income, such as Social Security benefits, alimony, child support, disability payments, or rental income. |
| Employment verification | You'll also need to provide an employer verification letter, contact information for your current employer, and recent pay stubs (which are also part of the income documentation). |
| Bank and asset verification | You'll need to submit bank statements from the last two months, along with statements for any retirement, investment, or other asset accounts, if applicable. |
| Personal identification | You'll be required to provide a government-issued photo ID, such as a driver’s license or passport, along with your Social Security card or an official document that displays your Social Security number. |
| Proof of legal residency | You’ll need to provide proof of citizenship or legal residency, such as a U.S. birth certificate, passport, or permanent resident card (green card). |
| Proof of divorce (if applicable) | If applicable, you’ll need to provide a finalized divorce decree along with documentation related to child support or alimony, such as a court order or formal agreement. |
You might think you’ve turned in everything your lender could possibly need, and then something else comes up. Remember, they aren’t asking for more paperwork to inconvenience you — they need it to proceed, so ensure you comply with the request as soon as you can.
“It’s quite common for USDA lenders to request additional information during the loan process,” says Christopher Migliaccio, an attorney with experience in real estate transactions. “This could be due to incomplete documents, clarification of financial records, or issues with the appraisal. Properly responding to these requests is crucial because delays can push back the loan approval and closing timeline, affecting the overall process and potentially complicating the transaction.”
If you’re serious about buying a home, take the time to get a preapproval from your lender. Note that this is different from a prequalification, which merely shows how much they think you would qualify for, based on basic financial information you give them.
Preapproval means you submit verification documentation, and the lender assesses how much money they will actually loan you, assuming nothing in your financial situation changes. While a preapproval will speed your mortgage process, it will also make you look like a more serious buyer, so it’s important all around. And remember, once you’ve turned in the paperwork needed for the preapproval, you won’t have to gather it again, so you’ll be one step closer to your USDA loan closing.
“Getting preapproved is not simply a formality. When you are preapproved, your income, credit, and assets are reviewed to ensure eligibility,” Shirshikov explains. “The preapproval process involves contacting a USDA-approved lender, filling out a loan application, and submitting the necessary documentation. I’ve worked with clients who didn’t do this step, found a home they loved, but then discovered they were not eligible for the USDA program, resulting in disappointment and wasted time.”
You don’t want to choose a rural home, only to learn that it doesn’t qualify as a USDA-eligible property. Always confirm that your desired property and area are USDA-approved.
USDA loans require an appraisal, which helps assess whether the sale price is in line with the home’s fair market value, a USDA appraisal ensures homes are safe and sound for homebuyers.
Your lender will set up the USDA appraisal once the purchase agreement is in place. The appraisal itself is conducted by a USDA-approved, independent third-party appraiser. Items the appraiser looks for include:
Some appraisals occur faster than others; geography, demand, and other factors, including appraiser availability, can all play a role.
“From my experience, the appraisal usually takes three to five business days to complete once ordered. Count on the appraiser to look at everything, including the foundation, roof, electrical systems, and plumbing. I recently had an appraisal catch some foundation issues that saved my client from a huge headache,” says Lokenauth.
Be aware that lenders don’t have any control over how quickly the appraiser gets out to your property or how fast their final report comes in.
Once under contract, it's important to remember that a preapproval is not the same thing as a loan approval. A lender’s underwriting staff will review your loan file, the home’s appraisal, and your overall credit and financial information.
Lenders will also look for red flags, which could cause them to question your ability to pay back your loan and delay the process, including but not limited to:
Note that the closing timeline isn't entirely in your hands. However, with preparation, you can help ease the process and get to closing quicker.
1. How Long Does USDA Loan Underwriting Typically Take?
Experts say that USDA loan underwriting can often take three to 10 business days, although this timeline will vary depending on the complexity of your file and how busy your lender is. Keep in mind that USDA loans require an extra step: final USDA approval, which can delay underwriting by a few days. This phase can take longer than expected because underwriters not only verify incoming credit, they also check that the property meets USDA eligibility requirements and federal guidelines.
2. Why Do USDA Loans Require a Home Appraisal?
USDA loans require a home appraisal to safeguard you and the lender by confirming that the property is worth the amount you plan to borrow, abides by livability and safety standards, and is eligible under USDA program guidelines. The appraisal also prevents you from overpaying and protects the lender from assuming unnecessary risks. Additionally, the appraisal validates that the USDA property is located in an eligible rural location and has no structural damage, unsafe conditions, or major issues. Because this financing requires no down payment, the appraisal also prevents borrowers from borrowing more than the property is worth.
3. Does It Take Longer to Close on a USDA Loan than Other Types of Mortgages?
It could take a bit longer than expected to close on a USDA loan compared to other types of home financing because it requires an additional step. After the lender green-lights the loan, the USDA also needs to examine and approve the financing. This can add a few extra days to the process in many cases. Typically, the average closing time spans 30 to 45 days, but delays can occur due to required repairs, appraisal issues, or a USDA backlog. Partnering with a lender who has experience with USDA loans can improve your chances of a snag-free, on-time closing.
4. Will My USDA Loan Closing Take Longer If I’m A First-Time Buyer?
Just because you’ve never purchased a home before doesn’t necessarily mean that it will take longer to close on your USDA loan. However, being unfamiliar with the process can cause delays, and if you lack a sufficient credit history or preferable credit scores it may be harder to qualify and the process could take longer. You can speed things along by gathering necessary documents ahead of time, responding quickly to lender requests, and learning more about what it takes to become a responsible homeowner.
