Let’s cover what the overall mortgage process looks like, from application to closing, and see how long each step typically takes and how underwriting fits into that process.
Loan Application And Preapproval: A Few Days
When you first apply for a mortgage, you’ll typically provide a whole bunch of information about your current financial situation. You may be asked to provide documentation showing your income, savings, debts and any other information that may pertain to your finances. You’ll also give the lender permission to look at your credit history and score.
The lender will look at all this information and determine whether, based on the information you provided, you meet their qualifications for getting a loan. This will typically take less than a week to complete.
Get Your Preapproval Letter
At this point, you may get a preapproval letter from the lender stating how much they’re willing to lend you based on your financial profile. This will help you understand your price range when you’re shopping for a home. Going through the preapproval process before you begin your search will help you make offers with confidence, and will help you work out any kinks in your application before you go through the underwriting process, which can help save time once you’ve found your future home.
Find A Home And Make An Offer
Once you’ve found the home you want, you’ll make an offer and negotiate it with the seller. If it all works out, you’ll both sign the purchase agreement and you’ll be under contract to buy that home.
Next, you’ll work with your lender to get full approval and be cleared for closing.
Appraisal And Valuation: A Week Or Less
Whether you’re purchasing or refinancing, you’ll most likely need to get an appraisal.
Your lender will order the appraisal. A licensed, third-party appraiser will create an appraisal report based on a physical examination of the interior and exterior of the subject property as well as the sales prices of recently sold properties that are similar to the property they’re appraising.
This report will include the appraiser’s opinion of the home’s fair market value. This whole process generally takes a week or less.
The appraisal is vital to the underwriting process. Knowing the home’s actual value, compared to the sale price, helps the underwriter calculate the loan-to-value ratio (LTV) and ensure that the borrower has enough money in their savings to cover a sufficient down payment.
Collecting Documentation And Underwriting: A Few Days To A Few Weeks
Once the details of your loan and application have been prepared, an underwriter will look over every aspect of your file and verify that you qualify for the loan and that the lender isn’t taking on too much risk by lending to you.
Underwriters will try to find the answer to these three basic questions.
How Risky Are You As A Borrower?
Have you defaulted on mortgage loans in the past? Do you have a strong history of making on-time debt payments? What is your credit score? These are the types of questions they’ll be looking to answer.
Can You Repay This Loan?
Underwriters want to know that your debt-to-income (DTI) ratio isn’t so high that you’ll have trouble affording your monthly payments. They’ll also ensure that you have some extra money available, known as reserves, that you could use to cover your mortgage payments if you were to suddenly lose your source of income.
Does The Home’s Value Cover The Loan Amount?
Lenders don’t want to lend more than what the home is worth, because the property acts as collateral in case you default on the loan. They’ll look at things like the loan-to-value (LTV), how much equity the borrower has in the home and the size of their down payment.
Conditional Approval And Additional Documentation: A Week Or So
If everything looks good, your lender may approve your loan, or they might give you conditional approval. As long as you can meet the conditions of the conditional approval, you’ll be cleared to close. This might mean that your loan otherwise looks good, but you need to provide additional documentation.
How long this stage lasts depends on how long it takes you to get the necessary information to your lender, and how long it takes them to process it.
Final Underwriting And Clear To Close: At Least 3 Days
Once the underwriter has determined that your loan is fit for approval, you’ll be cleared to close. At this point, you’ll receive a Closing Disclosure. This document goes over the final details of your loan, including the loan amount, your interest rate, estimated monthly payment, closing costs and the total amount of cash you’ll need to bring to closing.
You’ll receive your Closing Disclosure at least 3 days before your closing date. Assuming everything is in order, you’ll have only a final walk-through standing between you and closing day.
FAQs
The mortgage underwriting process can take anywhere from a few days to a few weeks. The timeline varies depending on whether the underwriter needs more information from you, how busy the lender is and how streamlined the lender's practices are.
How long does it take for the underwriter to make a decision? ›
How long does the underwriting process typically take? Underwriting can take a few days to a few weeks before you'll be cleared to close.
How soon after underwriting can you close? ›
Summary: Average Timeline for Closing
| Milestone | Time to Complete |
|---|
| Appraisal | 1-2 weeks for completion |
| Underwriting | 1 to 3 days for initial review |
| Conditional Approval | 1 to 2 weeks for additional underwriting review and clearing of conditions |
| Cleared to Close | 3 day mandated minimum for acknowledging Closing Disclosure |
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A mortgage underwriter typically denies about 1 in 10 mortgage loan applications. A mortgage loan application can be denied for many reasons, including a borrower's low credit score, recent employment change or high debt-to-income ratio.
How fast can an underwriter approve a loan? ›
Underwriting times for different loan types
| Loan type | Turn time |
|---|
| FHA | 5 days |
| USDA | 5 days |
| VA | 5 days |
| Non-qualified mortgage | 7 days |
1 more rowYou may be wondering how often underwriters denies loans? According to the mortgage data firm HSH.com, about 8% of mortgage applications are denied, though denial rates vary by location and loan type. For example, FHA loans have different requirements that may make getting the loan easier than other loan types.
How far back does underwriter look? ›
Data from the past 24 months is the most important information that mortgage lenders look at. However, they could look at derogatory information, like foreclosures or bankruptcies, that happened years before.
Can you speed up underwriting? ›
Write a Cover Letter to Submit to Underwriter
Writing a single-page cover letter can expedite the underwriting process, make you better at reviewing loan applications, and help you become a smarter MLO. Write a clear summary of the borrower's information, including income, credit score, assets, and appraisal.
Is underwriting the final approval? ›
Once all conditions have been met, the underwriter will give final approval for the loan. This means that the lender is ready to close the loan and fund the purchase of your new home.
How do you know if underwriting is going well? ›
After the underwriter reviews your file, they will typically issue a conditional approval. Being conditionally approved is usually a good sign. It means the underwriter expects your loan will close. However, you may need to help satisfy at least one or more conditions before that can happen.
Achieving final approval from the mortgage underwriter is a big deal — but it's not quite time to celebrate. You'll go through a few more steps before you get the keys to your new place. The lender has to double-check your income and employment. And you still have to sign final documents and pay closing costs.
Do underwriters want to deny loans? ›
There are many reasons why an underwriter may deny your mortgage loan, such as a low income, an unsatisfactory credit history or a recent change in employment. If an underwriter denies your mortgage loan, try going to a smaller lender or addressing the issues that caused the denial in the first place.
Do underwriters look at spending habits? ›
Spending habits
They will look for regular transfers or payments which might indicate a debt or other fixed commitment. And they will look to see if you are regularly spending less than you earn consistent with the savings you are claiming.
Can a loan be denied after closing? ›
Yes, you could get denied after you've been cleared to close. In the days leading up to your closing, do your best to make sure nothing happens that makes you look like a riskier borrower. Your safest bet is to avoid making any financial moves during this period, such as: Apply for any new credit cards or loans.
Can you be denied after underwriting? ›
Yes. Many lenders use third-party “loan audit” companies to validate your income, debt and assets again before you sign closing papers. If they discover major changes to your credit, income or cash to close, your loan could be denied.
Does the underwriter make the final decision? ›
The underwriter helps a mortgage lender decide whether to approve your loan and works with you to make sure you've submitted all your paperwork. Ultimately, the underwriter will help ensure you don't close on a mortgage you can't afford. If you don't qualify, the mortgage underwriter can deny the loan.
Can a loan fall through during underwriting? ›
There are many reasons why an underwriter may deny your mortgage loan, such as a low income, an unsatisfactory credit history or a recent change in employment.
