The Mortgage Marathon: Understanding the Timeline for Loan Approval

We recognize that purchasing a property is one of the most significant financial transactions you will ever make. We also recognize that this might be the trickiest purchase you have ever made. The process, while necessary, can often seem lengthy and complex. Understanding the timeline for loan approval helps set realistic expectations and prepare adequately for each stage.

You should definitely think about getting a complete pre-approval from a mortgage advisor prior to the start of your formal loan timeline. After receiving your pre-approval, you can go home shopping. The duration of this process varies. The number of properties in your chosen market and the level of competition within the buyer pool will determine the best time to buy. Remember that house hunting is not included in the loan approval timeline.

Before we begin, here are a few tips that can help you speed up the loan approval timeline:

● Be Prepared: Have all necessary documents ready. Be aware of the lender’s specific requirements.
● Choose the Right Lender: If time is of the essence, consider lenders known for faster processing times.
● Maintain Good Credit: A higher credit score can lead to quicker approvals and other benefits.
● Prompt Responses: Quickly responding to lender requests for additional information or documentation can prevent delays.
● Stay Organized: Keeping financial records and documents well-organized can make the process smoother.

Now that you know where to start, here are the steps on how long does it take to get a mortgage loan:

Application Submission

Duration: 1 Week
Before submitting your application, make sure to check your credit score. Gathering all the necessary documentation, such as proof of income, tax returns, bank statements, and identification. After comparing loan offers, approach the lender:

Fill out the application form. Most lenders offer online applications that can be completed relatively quickly, often within a few hours. Upload the gathered documents to the lender. This can take a few minutes to a few days, depending on the lender’s requirements and if anything else is required later.

Initial Review and Credit Check

Duration: 1 to 3 days
After submission, the lender performs an initial review of the application. They ensure all required information and documents are provided. They do a hard credit inquiry to assess your creditworthiness. This step is very important as it impacts your eligibility. It allows the lender to decide whether you are a worthy borrower.

Underwriting Process

Duration: At least 2 Weeks
Underwriters evaluate your financial health, including income, debt-to-income ratio, credit history, and employment status. Assessing the risk involved in lending to you involves additional checks, such as verifying employment or conducting an appraisal for secured loans like mortgages.

If the underwriter is satisfied, they may issue a conditional approval, which means the loan will be approved once specific conditions are met.

Verification

Duration: 2 Weeks
If the underwriter requests more information or documents, this can extend the timeline.

The speed at which you provide the requested information can significantly impact the timeline. Additional verifications, such as employment verification or a property appraisal, may be necessary, especially for larger loans or mortgages.

Final Approval

Duration: 3 Days

Once all conditions are met, the loan moves to the final approval stage. After the final review, the lender formally approves the loan and emails you a confirmation.

Loan Agreement and Signing

Duration: 5 Days

After receiving final approval, the next step is signing the loan agreement. The lender prepares the loan agreement, detailing the terms and conditions. When you review the agreement, look for any discrepancies. Make sure the document lists the terms previously discussed and nothing extra.

Signing can often be done electronically, making the process quicker. However, for some loans, especially mortgages, in-person signing is required.

Loan Disbursement

Duration: 7 Days
Depending on the type of loan, funds may be disbursed in a lump sum or stages. Personal loans usually involve a one-time disbursement, while mortgage funds are distributed in stages.

The time it takes for funds to reach the borrower’s account can vary, but it typically takes a few days after the loan agreement is signed.

To answer the question, “How long does it take to get a mortgage loan?” – anywhere between 30 and 60 days.

Delays in Mortgage Approval

Incomplete Documentation

One of the most common reasons for delays in mortgage approval is incomplete documentation. Lenders require many documents to assess your financial health. This tells about your ability to repay the loan. Missing or incorrect paperwork can slow down the process.

Employment Changes

Stability in your employment status is important for mortgage approval. Recent changes in employment, such as switching jobs or altering your income structure, can raise red flags for lenders.

Lenders prefer borrowers with a stable employment history of at least two years. Major job changes trigger additional scrutiny. Moreover, gaps in employment need to be well-explained.

Property Appraisal Issues

If the appraisal value is less than the purchase price, you may need to renegotiate with the seller. It’s possible that you might end up paying the difference out-of-pocket.

Issues such as structural problems, pest infestations, or necessary repairs can affect the appraisal. The lack of comparable property sales in the area can complicate the appraisal process further.

Legal Issues

Legal issues surrounding the property can also delay mortgage approval. Conflicting claims of ownership or unclear property boundaries stop the process in the middle. In case there are any existing debts or claims against the property, you will have to clear them first.

If the previous owners made changes to the property’s structure without approval, you will need permits for them.

Title Issues

The title of the property must be clear of any disputes. Delays can happen because of unpaid property taxes and undisclosed heirs. Obtaining title insurance can take time, especially if there are complications in the title history.

Changes in Financial Situation

Any significant changes in your financial situation during the application process can cause delays. Taking on new debt, such as a car loan or new credit card, can affect your debt-to-income ratio and delay approval. Losing your job can lead to delays as lenders reassess your ability to repay the loan. Large deposits or withdrawals in your bank accounts can raise questions that need to be addressed.

Effective communication between all parties involved is the cornerstone of the loan approval process. The major parties include the lender, the seller, and the real estate agent. Delays can occur if you don’t promptly respond to requests for information or documentation.

The loan application steps, from pre-approval to signing the final document, are not always swift. Depending on the type of loan, the lender’s requirements, and the borrower’s financial situation, the process can take anywhere from several weeks to two months. However, patience and thorough preparation can remove delays. Gathering all necessary documentation in advance, such as proof of income, tax returns, credit reports, and any other required information, can speed up the application process.

RateSimple has streamlined the mortgage application process to save you time and stress. Getting started with our online mortgage application is easy. Simply enter the zip code of the area you want to buy the house in, answer a couple of questions about your needs and wants, and we will connect you to multiple willing lenders.