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Your real estate agent will advise you to select your mortgage provider and obtain preapproval for a mortgage so you are aware of the price range you can afford before you begin your home search.
Once the contract for the house of your dreams has been signed, you need to file a formal mortgage application. At that point, the mortgage company will take a deeper dive on you and your transaction.
This procedure, known as mortgage underwriting, entails a number of conditions on your end as well as actions on the underwriter’s end that may affect the timeline for closing on your house purchase.
We’ve asked HomeLight’s Loan Officer and Sales Lead, Richard Helali, to take a peek behind the scenes and explain the mortgage underwriting process. What happens during the underwriting process, how long will it take, and what can you do to ensure that everything proceeds more smoothly?
Buying a home is an exciting time, but the mortgage process can feel like a long and winding road. One of the most crucial steps in this process is underwriting, where the lender evaluates your financial situation and the property to determine your eligibility for the loan
If you’re considering an FHA loan, you might be wondering, “how long does FHA underwriting take in 2021?” The answer, unfortunately, isn’t a simple one.
Several factors can influence the timeline, including:
- The complexity of your financial situation: If you have a complicated financial history, such as recent bankruptcies or foreclosures, the underwriter may need to spend more time reviewing your documentation.
- The workload of the underwriter: If the lender is experiencing a high volume of loan applications, it may take longer for your file to be reviewed.
- The type of FHA loan you’re applying for: Some FHA loan programs, such as the 203(k) loan for rehabilitation, may have additional requirements that can lengthen the underwriting process.
In general, FHA underwriting can take anywhere from a few days to a couple of months However, according to the Mortgage Reports, the average time for FHA loans to close is 45 days. This includes the time it takes for the underwriter to review your file, order an appraisal, and issue a final decision.
Here’s a breakdown of the typical FHA underwriting timeline:
- Days 1-3: You submit your mortgage application and supporting documentation to the lender.
- Days 4-7: The underwriter reviews your file and orders an appraisal.
- Days 8-14: The appraiser inspects the property and submits their report to the lender.
- Days 15-21: The underwriter reviews the appraisal report and makes a final decision on your loan.
- Days 22-45: You close on your loan and receive the keys to your new home.
It’s important to note that this is just a general timeline. Your actual experience may vary depending on the factors mentioned above.
Here are some tips to help speed up the FHA underwriting process:
- Be prepared with all of your documentation. This includes your tax returns, pay stubs, bank statements, and any other documents that support your financial situation.
- Respond promptly to any requests from the underwriter. The faster you can provide the information they need, the faster they can complete their review.
- Don’t make any major changes to your credit or financial situation during the underwriting process. This could raise red flags and delay your approval.
If you’re concerned about the length of the FHA underwriting process, talk to your lender. They can give you a more accurate estimate of how long it will take based on your individual circumstances.
Here are some additional resources that you may find helpful:
- Federal Housing Administration (FHA) website: https://www.hud.gov/program_offices/housing/sfh/nsc
- Consumer Financial Protection Bureau (CFPB) website: https://www.consumerfinance.gov/owning-a-home/loan-process/
- The Mortgage Reports: https://themortgagereports.com/
Remember, buying a home is a big decision, so it’s important to be patient and thorough throughout the process. By understanding the FHA underwriting process and taking steps to speed it up, you can be well on your way to owning your dream home.
The review: 1 to 3 days
In the first few days, the underwriter will look at the documentation you have submitted. This comprises records of your earnings, possessions, and obligations, as well as the amount of money you’re paying for the house and your credit score.
Helali says the underwriter begins by reviewing the application, which contains your name, place of employment, income, and any additional assets you may possess. But the underwriter isn’t going to take all this information at face value.
“The underwriter also wants to see the documentation supporting it,” Helali says. “You say: ‘I make $100,000 a year. ’ The underwriter says, ‘That sounds good — but show me the $100,000. Show me your W-2 and pay stubs. They will constantly review the application and contrast it with the supporting documentation. ”.
The documentation: 7 to 14 days
Often, the underwriter will require further documentation to support the information provided on the application. For example, if you claim to have $50,000 in the bank, but your documentation indicates that you will be making a $100,000 down payment on the house, the lender will likely request more information.
“The underwriter will reply to the client and say, ‘We appreciate your application, but we need all these items,'” Helali says. After that, the client must supply those things, at which point it returns to the underwriting queue. ”.
This gets more complicated if, for example, you are self-employed, or you have another business on the side.
Helali says, “If someone is self-employed, we would probably need a profit-and-loss statement or a balance sheet from their business for the current year, in addition to any tax forms and their tax returns for the last two years.”
It will take clients a little longer to provide that information, and it will also be more difficult for the underwriter than if they were just comparing your W-2 and your pay stubs and quickly calculating the amounts. The underwriter may need to go through the taxes line by line to determine what they can and cannot use toward income, as that process will be more difficult. ”.
Helali adds that having several businesses or revenue streams might complicate your file because it gives the lender more information to sort through.
How long does it take for the underwriter to make a decision?
FAQ
How long does it take for underwriting to approve an FHA loan?
How often is FHA underwriting denied?
How fast can you close an FHA loan?
What stage of home buying is underwriting?
How long does FHA underwriting take?
As we’ve mentioned, the underwriting part of this could take anywhere from a few days to a few weeks. How long does underwriting take for an FHA loan? Federal Housing Administration (FHA) loans take an average of 45 days to close. For home purchases, the average is 44 days. For refinances, it’s 48 days.
How long does a mortgage underwriting process take?
Underwriting begins with your mortgage application and wraps up right before you’re ready to close the deal on your new home. Any hiccup — such as a minor mistake on a document or even a loan officer out of office for the day — can delay your closing. The length of the underwriting process can take anywhere from several days to a couple of months.
What is the underwriting process for a home loan?
The underwriting process for home loans has five basic steps. Here’s what to expect: 1. Apply for a mortgage The first step is filling out an application online, over the phone or in person.
How long does underwriting take for a refinance?
The underwriting process for a refinance follows the same steps as the underwriting process for a new loan. It can take anywhere from several days to several weeks to complete underwriting, depending on yours and the lender’s circumstances. What should I do if my loan application is denied during underwriting?