How Long Is The Process For A Bank To Approve A Mortgage Loan?
A breakdown of how long it takes for a bank to approve a mortgage loan. How many days are your paperwork is in processing, underwriting, draw documents, and close.
The rule of thumb is 30 days for a bank to approve a mortgage loan and transfer the funds for your home purchase if you are a conventional homebuyer. A conventional homebuyer has a minimum of 10% for a down payment, good credit, and a low debt-to-income ratio.
The new timeline for a mortgage loan
The reality is that it takes closer to 45 days to approve a mortgage loan these days. With so many homeowners refinancing or calling their banks for loan modification, the banks are slower than normal in approving a mortgage loan. Unlike a few years ago when anyone can get a mortgage loan, banks are reviewing your documentations with a fine tooth comb even if you are a conventional homebuyer. If you are planning to purchase a home with a FHA loan, be prepare to put 60 days in your contract for closing.
Processing the mortgage loan
During the mortgage processing stage of obtaining a mortgage loan, the processor verifies all the financial information you provided is correct. The processor will call your employers, financial institutions, and pull your credit report.
As the same time, your loan officer will request a home appraisal and title report. With today’s falling home prices and the amount of people wanting to refinance, it is often the home appraisal that delays the mortgage loan process. Depending on when your employer and financial institutions respond to the bank’s inquiry and the home appraisal, the mortgage processing stage can take anywhere between 2-3 weeks.
Underwriting the mortgage loan
Once the processor verifies that the bank’s loan requirements have been met, the processor will send a loan package to the underwriting department. The underwriter has the authority over the approval of your mortgage loan. Depending on how many loans the underwriter has to approve, it can take up to 2 weeks to get your loan package review by the underwriter. The underwriter usually sends a list to the loan officer called “conditions to close.” This list basically is a request for further documentation. It can take a few days to obtain the documentation for the “conditions to close” list.
Drawing documents for the mortgage loan
After the underwriter approves the mortgage loan, your loan officer draws up the mortgage loan documents and sends it to the closing company. Drawing the documents can take 1-2 days.
Closing the mortgage loan
After making an appointment with the closing company, you need to show up with your checkbook and sign a huge pile of documents. Congratulations, you just got your mortgage loan.
*Affects pricing. With the No Closing Cost
Option, borrowers finance the closing costs instead of paying for them at
closing. Borrowers who pay closing costs at closing may qualify for a lower
interest rate. Some upfront fees (ex. credit report and appraisal) may apply
and may be credited at closing.
*Refinancing or taking out a home equity loan or line of credit may increase
the total number of monthly payments and the total amount paid when compared to
your current situation.
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