Before approving a home loan, mortgage lenders must undergo underwriting, which can be completed in as little as two to three days and involves verifying your assets, checking your credit scores, and reviewing your tax returns. However, the process usually takes a loan officer or lender more than a week to finish.
After the down payment is made but before you close on a property, the underwriting procedure takes place. Therefore, timing is important when it comes to this home loan process, especially if you want to move in by a specific date.
But make no mistake: The underwriting process is unavoidable. Prior to the mortgage lender committing to providing you with the funds for a purchase, all loans and loan applications undergo an underwriting procedure.
Even though you may communicate with your bank lender or mortgage officer on a daily basis, the underwriting process will still be drawn out, confusing, and possibly stressful.
What is the underwriting process and how does it work?
Mortgage underwriting is really an exercise in risk mitigation for the lender. The lender wants to ensure you’re not going to default on the loan they’re originating for you, so they take a close look at all of the evidence that supports the idea that you’re a solid borrower.
The underwriting process includes an evaluation of your financials, your credit history, down payment, and the property you’re buying in making a final decision. It happens behind the scenes, but you’ll often get requests from the underwriter while they’re reviewing your application.
After reviewing your application, the underwriter will reach a decision on one of three things:
- Approved: Your mortgage is clear to close. You don’t need to provide any additional information.
- Rejected: If your application is rejected, you will normally get a letter in the mail explaining why. Knowing why can assist you in modifying your financial situation so that you are eligible again in the future.
- Pending: Before a decision is made, your application might require some extra supporting documentation.
What documents do you need for underwriting?
Your lender will ensure you have the following documents when it forwards your information to underwriting:
- Identification
- Last 30 days of pay stubs
- W-2s or I-9s for two years
- Other proof of income
- Federal tax returns
- Recent bank statements
- Proof of assets
- Details on long-term debts
- Real estate contracts and property information
It’s also common for the underwriter to ask for letters or explanations of scenarios unique to you. Examples include gift letters, previous bankruptcy or foreclosure documents, rent history, or a divorce decree.
How long does mortgage underwriting take?
The underwriting process can take a few days or several weeks. It happens prior to closing but after you have an accepted contract on a house.
There are several variables that can affect how long it takes, such as:
- Lender: The duration of underwriting may vary depending on whether the underwriter is employed internally or externally. Sometimes, it’s the difference between a bank and a broker. The underwriting procedure used by the lender may have an impact on the duration.
- Loan type: Some loan programs, such as VA, FHA, or USDA loans, may need more paperwork than others.
- Application volume: It may take a lot longer for your documentation to pass underwriting if the mortgage lender is handling multiple applications concurrently.
- Your particular circumstances: The process may take longer if the underwriter needs to examine your particular credit or financial situation. Underwriting may be delayed if you also take actions that impact your credit history, like applying for a new auto loan.
The biggest delays in underwriting occur from mistakes, missing paperwork, or any other issues that the lender finds in the process. It’s a normal part of the mortgage process, so if you get a request for more information, submit it as soon as possible.
Underwriting times for different loan types
With one exception, we discovered in our research that the underwriting (also known as turn time) period for each type of loan is nearly the same. Conventional, FHA, USDA, or VA loans take two days less than a non-qualified mortgage.
| Loan type | Turn time |
|---|---|
| Conventional | 5 days |
| FHA | 5 days |
| USDA | 5 days |
| VA | 5 days |
| Non-qualified mortgage | 7 days |
Note: FHA and USDA loan processing times may vary, but generally speaking, they follow the same schedule.
A mortgage that employs different techniques to confirm income is considered non-qualified. It is intended for those with non-traditional sources of income, including retirees, self-employed people, contractors, and artists.
There is more to loan acquisition time than just underwriting. You can’t control a lot of things, like how long it takes to get an appraisal, but if you persevere, you can finish the house loan application process quickly.
How long does underwriting take FAQ
After underwriting, if your mortgage application is rejected, make sure you contact the lender and have your credit checked. It’s possible that the lender needs more information, or that you can correct errors on your credit report. Additionally, you might have to wait a little while before applying for a mortgage. You might also be able to try a different program that provides a variety of mortgage options.
What might make an underwriter deny a loan?
The following are some typical reasons an underwriter might reject a loan application: the borrower doesn’t meet the loan requirements; new credit lines; fabricated or inaccurate information; low credit score; job change; or an unexpected deposit into your bank account.
Can you reapply after being denied?
Yes, you can reapply after being denied. Depending on the cause of the rejection, you might want to hold off. You may put yourself in a better position to be approved later if you can raise your income, decrease your debt-to-income ratio, raise your credit score, or save more money.
What happens after underwriting?
Your lender will send you a closing disclosure once underwriting has approved your loan to close. You’ll be able to see the precise amount of your loan, along with its terms, fees, and interest rate. Bring a cashier’s check for the money required to complete the transaction (down payment, closing costs, etc.) along with a picture ID.
Do they check your credit report during underwriting even if you’re pre-approved?
Throughout the loan process, lenders will check your credit several times, including before closing and at the start. It is possible that a borrower will be ineligible if they open a new credit line and it appears on their credit report. Meet the expert: Alene Laney.
Southwest-born Alene Laney is a multi-award winning personal finance writer. Her main goal is to assist families in making the best financial decisions possible regarding loans, mortgages, and credit. Her genuine passion is award travel, which enabled her to travel even in times of financial hardship.
FAQ
How long does it take for the underwriter to make a decision?
How long does underwriting usually take? It may take anywhere from a few days to several weeks before you are approved to close.
Is a loan approved when it goes to underwriting?
The underwriting procedure is how a lender determines if a borrower is creditworthy and deserving of a loan. Preserving favorable portfolio quality requires an efficient underwriting and loan approval process, and one of the primary goals of this function is to minimize unnecessary risks.
How often do mortgages get denied in underwriting?
What percentage of loan applications are denied by an underwriter? Approximately 10% of mortgage loan applications are denied by an underwriter. Applications for mortgage loans may be rejected for a variety of reasons, such as a borrower’s poor credit history, a recent job change, or an excessive debt-to-income ratio.
Read More :
https://www.rocketmortgage.com/learn/how-long-from-underwriting-to-closing
https://www.credible.com/blog/mortgages/underwriting-process/