How long does underwriting take?
While every lender’s policy is different, underwriting your mortgage application could take anywhere from a few days to a few weeks to complete.
The mortgage underwriting process means your home loan application has reached the underwriter’s desk.
This person will review the loan amount, your financials (bank statements, credit score, pay stubs, etc.), order an appraisal and title search on the property you intend to purchase, and then issue a decision: approved, denied, or suspended/decision pending.
Below, we’ll cover the steps that are involved for you, as a borrower, in the loan underwriting process, including tips to speed things up with your lender.
Note: Turn times can be impacted by a number of factors, like your lender’s internal staffing policies, the volume of the loan applications currently in their pipeline, the complexity of your home loan profile, etc. Use the following as estimates of the mortgage underwriting process when working with your lender.
What are the steps in the underwriting process?
At this step, the underwriter reviews your application and all related documents with the goal to determine any risk factors that might be involved.
This process assesses the borrower’s credit history, financial records, as well as the value of the loan collateral.
2. Conditional approval
After the underwriter reviews your file, they usually issue a conditional approval.
Although being conditionally approved is often a good sign, it doesn’t mean that it will speed up the process or your application will be 100% approved by the end of the process — but it does mean that the underwriter expects your loan will close if the conditions are met.
In order to ensure you go through the mortgage application process smoothly, you may need to satisfy one or more conditions before underwriting will move forward.
This usually means providing additional information and documents.
Although specific requirements will vary by lender and your unique home buying situation, a conditional approval status of a mortgage loan includes conditions that can affect the time involved.
Most common are:
- A signed gift letter in case someone is giving you, the borrower, money to help with the home purchase.
- More detailed financials (these are often bank statements, your credit report, details on other previous debts like a car loan).
- Homeowners insurance.
- The home appraisal amount coming in at or above the purchase price (more on that in the next step).
- Confirmation from your employer that the borrower is on their regular payroll or receives wages from them.
- A letter where the borrower explains specific aspects that concern the lender (e.g., a recent large withdrawal you may have made or fresh debt).
The best way to speed up this process as a borrower is to collect all these documents in advance in case an underwriter asks for them later.
At this stage the underwriter orders an appraisal to be conducted by a certified appraiser or appraisal company to evaluate the property.
The property appraisal process is done by considering the property’s location, condition, and features — its overall “comps,” which define how it compares with other properties in the neighborhood with respect to current market value.
4. Title search
During this step an underwriter orders a public records search to verify a property’s legal ownership and, therefore, ensure that the seller can legally sell the property at the listed address to the buyer.
Title searches are conducted through many sources, so the time needed for this step will greatly vary.
Most popular title search sources are:
- Tax liens;
- Land records;
- Court judgments.
5. The underwriting decision
After the initial assessment, any conditions listed to be met, and the appraisal and title search processes, the borrower can expect the underwriter to make a decision to either approve, deny or suspend the loan.
Approve: An application with low risks involved usually gets approval.
The underwriter determines that the mortgage application is a “good loan” for the lender with respect to the ability of the borrower to pay back the home loan.
Deny: The underwriter rejects the application based on different factors like high risk(s) being involved.
Suspension: The underwriter can suspend the application if there isn’t enough information to make a decision. They usually let the borrower know how to proceed so the applicant can re-activate the loan application.
Tips to speed up the underwriting process
1. Save cash in a verifiable asset account
Lenders prefer when you have documented funds. For example, cash in a bank account, 401K, or some other liquid asset account that may potentially cover the down payment, closing costs and what you have in reserve are all assets.
Reserves are funds that you may need after an approved underwriting process decision since they assure a lender that you will be able to continue making payments on your loan in case of loss of the income (this also reduces risks associated with the application and increases your chances of getting approved).
2. Organize documents
Properly organizing your documents before meeting with a loan officer that will send your docs to underwriting is one of the best ways to speed up the underwriting process.
These documents should be ready when you apply:
- Employment information covering the past two years (including W-2s if applicable). In case you are self-employed, you will need to provide business records and tax returns for the last two years.
- Pay stubs from at least 30 days prior the day you are going to apply.
- Account information (checking, money market, savings, CDs, investments; retirement accounts, etc.).
- Extra income information (alimony or child support, bonuses or commissions, annuities, digital investments, interest, pensions or Social Security payments).
3. Respond immediately to information requests
As mentioned, the underwriter may require additional information.
Send those items on time — it is best to provide documents within 24 hours.
The longer you take to provide additional documents, the longer it takes to return a decision.
4. Avoid major changes
It is best to avoid major changes during the home buying process. These include:
- Large purchases like buying a car;
- Inquiring on new accounts;
- Closing accounts;
- Changing a job.
All these changes may impact your credit by increasing your debt-to-income ratio.
This can lead to a larger down payment required, higher interest rate or, as a result, potentially an application denial.
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Mistakes like unorganized documents, missing signature and missed messages regarding additional documents needed may make the underwriting process longer.
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