Buying a home is an exciting and memorable time for most people. However, the actual mortgage approval process can quickly dampen the mood, and it often proves to be quite stressful for anxious buyers. But there are things you can do to actually speed up the timeline—or at least not delay it.
We’ll look at the mortgage approval process to help you better understand the process and how you can work to move it along
- The mortgage process starts with prequalification and/or preapproval, followed by the actual formal loan underwriting process, and ends with final approval.
- Submitting thorough and accurate documents can keep the mortgage process moving, while negotiating with sellers or running into issues with inspection could slow down the process.
- The typical start-to-finish timeline when applying for a mortgage varies greatly depending on a variety of factors.
The Mortgage Approval Process
From preapproval and making an offer to underwriting and receiving final approval, there are many steps in the mortgage approval process. We’ll discuss each one.
Applying for Preapproval
Timeframe: Up to one week
A mortgage preapproval is an important first step in buying a house as it gives you an idea of how much a lender is willing to let you borrow. “To obtain a preapproval, a borrower’s credit is checked and other documents are collected, so it may take roughly a week.” Andrina Valdes, COO of Cornerstone Home Lending in San Antonio, Texas, told The Balance by email.
It may not always take that long; the time frame is usually dependent on the borrower’s situation. “A good lender should be able to get a buyer preapproval within the hour, so long as they have a relatively straightforward W-2 employee profile,” Sarah Alvarez, vice president at William Raveis Mortgage in New York City, told The Balance by email.
A preapproval letter is an offer to lend you a specific amount—not a contract—and it is only good for 90 days.
House-Hunting and Making an Offer
The length of the house-hunting and offer phase is ultimately up to you. You may find your dream home on day one, or it may take you several weeks or months to determine which to make an offer on. Once you do, your agent will draft the offer and then you’ll sign it. The offer typically includes the target closing date, provisions for certain fees, a deadline for them to accept or counter your offer, and any contingencies.
Most lenders suggest spending no more than 28% of your monthly pre-tax income on your mortgage payment, including all fees, interest, taxes, and insurance.
Sometimes, negotiations may arise that can extend the house-buying time frame. “Price is not the only thing open for negotiation; other possible items include repairs, inspection contingencies, fixtures, and the closing timeline,” Brad Jones, chief marketing officer of Newrez LLC and a licensed loan originator, told The Balance by email.
If the seller accepts your offer, the purchase and sale agreement are legally binding and the process will advance to property inspection and appraisal. The time frame for these steps depends on a lot of moving parts. For example, you’ll need to take into consideration how long it may take to get the home inspection appointment, and whether the inspection turns up any problems. The process could also be delayed if the appraised value is significantly different from the sales price.
Timeframe: 30-45 days
The next step is the formal underwriting process. The type of mortgage loan is what will ultimately determine the documents you’ll need to provide. As a general rule, here’s what’s typically required:
- Driver’s license or photo ID
- Pay stubs
- Social Security number
- W-2 forms for the last two years
- Proof of any additional income
- Tax returns
- Recent bank statements or proof of other assets
- Details on long-term debt (i.e., student loans, auto loans)
“If you own additional property, you’ll need to provide mortgage statements, property tax bills, a homeowners insurance declaration page, and any HOA or maintenance statements,” Alvarez said.
At this stage, the underwriting process will also make sure your credit is supported by the documents you’ve supplied. And Alvarez says two things that borrowers don’t think of can slow down the process at this point.
“First, if a buyer is paying for their car out of their business, they should ensure this comes out of a separate business account, otherwise underwriters will look at it as a liability against them,” Alvarez said. Second, if you own property with a family member or friend but you’re not making payments, the payments should not be coming out of a joint account that also has your name on it, she says. If it is, this joint mortgage will be seen as a liability.
Underwriting is a crucial part of the mortgage approval process, so it’s best to have all of your ducks in a row to avoid delays. According to Karen A. Kostiw, an agent for Warburg Realty in New York, NY, the lender’s underwriters are reviewing loan applications for what’s known as the ‘Five C’s of Credit’: character, capacity, capital, collateral, and conditions. That’s why your employment, debt, and income are analyzed so carefully.
“That information will allow underwriters to evaluate a borrower’s credit and character, as well as their credit score, which is generated by two or three credit bureaus, to ascertain a risk profile,” she told The Balance by email. “The capital of a borrower will demonstrate how much savings are available for hardships, and the collateral is reviewed by the underwriter upon receiving the appraisal report,” Kostiw said.
Because it’s so important, the underwriting process can take anywhere from 20 to 45 days, said Jones. To avoid delays, he recommended promptly responding to any inquiries and avoiding major purchases or job changes during this time.
There is a "Know Before You Owe” mortgage rule, which ensures you will receive an easy-to-understand Closing Disclosure three business days before closing. You can use this time to review it as needed with your lawyer or housing counselor so that you are clear about every aspect of your mortgage terms and costs.
Frequently Asked Questions (FAQs)
How many days before closing do you get mortgage approval?
The average time to close a mortgage loan is around 49 days according to the August 2021 Origination Insight Report. However, some lenders are able to close your mortgage within 10 days to a few weeks.
How long does a mortgage approval last?
A commitment letter is typically valid for 30 days, but some may last up to 90 days. There may also be expiration dates listed based on the borrower's documents, and as long as buyers keep those up to date, the commitment can be extended. Ultimately, timeframes can vary by lender, so it’s best to get this information from your lender.
What is a conditional mortgage approval?
A conditional mortgage approval occurs after the initial review and is issued by the underwriter when there are questions or requests for additional information or documentation. For example, if a large deposit shows up in your account, the underwriter might ask you to explain where it came from. This is mostly to verify all information so that the closed loan is as sound and risk-free as possible for the mortgage lender.