Securing a mortgage can be daunting during homeownership, particularly during the underwriting stage, and can impact your timeline. we will guide you through mortgage underwriting, exploring what it entails, breaking down the steps involved, understanding the factors influencing its duration, and providing insights on expediting the process.

 

What is Mortgage Underwriting?

Mortgage underwriting is the behind-the-scenes evaluation that transpires once you submit your loan application. It involves a meticulous examination of your credit and financial background by a lender to determine your eligibility for a loan.

Beyond a mere formality, underwriting plays a pivotal role in shaping the terms of your mortgage, making it essential to understand this process before delving into homeownership.

 

Steps in the Mortgage Underwriting Process

The mortgage underwriting process can be broken down into a few steps.

Step 1: Submit your complete mortgage application.

The first step towards obtaining a loan is filling out a loan application. If you are eligible for a loan, the information you provide will help determine your eligibility. Due to the unique nature of every situation, the exact documents you will need may vary. In most cases, you'll need to provide:

 

• Identification and Social Security number
• A copy of your last 30 pay stubs
• I-9s or W-2s from the past two years
• Income proof from any other sources
• Federal tax returns
• Proof of assets or recent bank statements
• Information about long-term debts like student loans or car loans
• A signed offer to purchase (includes property information and the offer to purchase)

As soon as you sign up, you'll answer simple questions along a guided path and be able to import and upload documents easily. You can ask a mortgage loan officer for assistance if you need help getting started with your mortgage loan application. A Loan Estimate (LE) showing your estimated closing costs will be delivered by your lender within three business days after you submit your complete application.

Step 2: Allow the review process to take its course.

Your application is processed by a loan processor who gathers and organizes the necessary documents for the underwriter. Your loan application is approved or denied by a mortgage underwriter. As part of the loan approval process, underwriters look for several factors. Credit history, income, and any outstanding debts are all considered when considering your application. An important part of the underwriting process is assessing credit, capacity, and collateral.

Step 3: Secure a property appraisal.

To confirm the home's value aligns with the purchase price, an appraisal is conducted. This step ensures that the loan amount is not higher than the property's value, protecting both the buyer and the lender. Any discrepancies may necessitate negotiation or adjustments before moving forward.

Step 4: Make sure your investment is protected.

Title insurance and homeowner's insurance are vital measures to safeguard your investment. The title search checks for potential issues like liens or unpaid taxes, while homeowner's insurance covers unforeseen events. Both contribute to a seamless underwriting process.

Step 5: A well-informed underwriter makes a decision.

Based on the gathered information, the underwriter decides whether to approve, deny, or pend your mortgage application. Understanding the implications of each decision is crucial, and Mortgage Dove ensures a transparent communication channel throughout this stage.

Step 6: Confidently close your deal.

Congratulations, you've reached closing day! Receive a Closing Disclosure at least three days before closing, review the terms, and make arrangements for your down payment. The final paperwork, payment of closing costs, and receiving the keys to your new home complete this momentous journey.

 

What Determines How Long Mortgage Underwriting Takes

Several factors influence the duration of mortgage underwriting. The number of applications a lender is processing, their internal policies, and the complexity of your financial situation all play a role. For those with intricate financial histories, such as self-employed individuals, the process may take a bit longer. Understanding these variables can help manage expectations during the underwriting stage.

 

The Underwriting Approval Process Broken Down

Taking a look at how the mortgage approval process works, from application to closing, and how underwriting plays a part, let's see how long each step normally takes.

Preapproval and loan application: Less than a week

First-time home buyers often provide a lot of information about their current financial situation when applying for a mortgage. In addition to your income, savings, and debts, you may also be asked for documentation of your finances. In addition, you will give the lender permission to check your credit history and score.

The lender will determine if you qualify for a loan based on the information you provide. The process usually takes less than a week.

Request a letter of preapproval

Depending on your financial profile, the lender may send you a pre-approval letter stating how much they are willing to loan you. When you're looking for a home, this will help you determine your price range.

Once you've found your future home, preapproval will allow you to make offers with confidence, and it will provide you with time to iron out any kinks in your application before the underwriting process begins.

Search for a home and make an offer

The next step is to make an offer to the seller once you've found the home you want. The house purchase agreement will require signatures from both parties. Next, you'll work with your lender to get full approval to close.

Appraisal And Valuation: A Week Or Less

Whether buying a new home or refinancing your current one, you will likely need to obtain an appraisal. Your lender will order the appraisal, and a licensed third-party appraiser will create a report based on a physical examination of the interior and exterior of the property and the sale prices of recently sold properties comparable to the one being appraised.

This report will include the appraiser's opinion on the home's fair market value. Typically, this entire process takes a week or less. The appraisal is a crucial part of the underwriting process. Calculating the loan-to-value ratio (LTV) and verifying the borrower's savings for a down payment.

Documentation and underwriting: Days to weeks

A lender's underwriter will thoroughly assess your loan and application to verify that you qualify for the loan and that the lender is assuming an acceptable level of risk by lending you money.

Additional documentation and conditional approval: Approximately one week

You might get conditional approval from your lender if everything looks good. The conditional approval will be met if you meet its conditions. You might need to provide additional documentation even if your loan is otherwise good.

If the lender requires more time to process your application, then this stage will take longer.

Underwriting and closing: At least three business days

Your loan will be approved once the underwriter has determined it is a good fit for approval. A Closing Disclosure will be provided to you at this point. Including your loan amount, interest rate, estimated monthly payment, closing costs, and the amount of cash necessary to close, this document provides final details regarding your loan.

Closing Disclosures are mailed at least three days before closing. Providing everything goes smoothly, you'll only need to do a final walk-through before closing.

How To Speed Up The Underwriting Process

While much of the underwriting process is handled by your lender, there are proactive steps you can take to expedite the process. Providing accurate information upfront, refraining from applying for new credit during the application process, and staying in constant communication with your loan officer can significantly contribute to a smoother and faster underwriting experience.

FAQs About Loan Underwriting

Here are a few frequently asked questions about mortgage underwriting.

What is the typical underwriting time for a conventional loan?

On average, conventional loans take about 44 days to close. The underwriting part varies, taking from a few days to a few weeks, depending on the circumstances.

What is the underwriting process timeframe for an FHA loan?

FHA loans take around 45 days to close, with the underwriting process ranging from a few days to a few weeks, similar to other types of home loans.

What is the average time it takes for VA loans to be underwritten?

VA loans, tailored to veterans, take an average of 55 days to close, with the underwriting process spanning a few days to a few weeks.

How long does underwriting take for a refinance?

The underwriting process for a refinance mirrors that of a new loan, taking several days to weeks based on individual and lender circumstances.

What could be done if a loan application Is denied during underwriting?

Understanding the reason for denial is crucial. Whether it's excessive debt, a low credit score, or ineligibility for a specific loan type, addressing the issue is the first step toward a potential solution.

 

Bottom Line

In the complex landscape of mortgage underwriting, knowledge is your greatest asset. With a thorough understanding of the process, its steps, and the factors that affect its duration, you can confidently navigate the path to homeownership.

At Mortgage Dove, we are your trusted partner throughout this journey, providing transparency, efficiency, and support at every stage. As you embark on this exciting venture, always remember that an informed borrower is an empowered borrower.