The mortgage loan process may seem far from simple. There’s a lot that happens between your initial consultation and your loan being funded. Here, we’ll walk you through it, step by step.
We’ll explain every major step of home loan processing. Of course, there are many factors in play here, so no one can guarantee that an applicant will be approved, or that a closing can or will occur within a specific timeframe. All dates and time periods we give here should be taken as estimates. Just bear that in mind as we go along.
That said, if you ever feel you’re lost — just contact us! We understand that choosing a mortgage is the biggest financial decision of your life, and we’re committed to making the process as seamless, friendly, and financially valuable to you as possible.
Here are the six major milestones you’ll reach during loan processing and what’s happening at each stage of the process:
Buying a home is likely one of the biggest financial decisions you’ll ever make. The mortgage loan process can seem long and complex, with many steps between your initial application and receiving the keys to your new place.
Achieving final approval from the mortgage underwriter is a major milestone, but it doesn’t necessarily mean you’re ready to move in just yet. There are still a few hurdles left to clear before your loan is completely funded and the home is yours.
In this article, we’ll walk through the key steps between underwriter approval and closing day, so you know what to expect during the home stretch of the mortgage process.
Conditional Approval vs Final Approval
Before issuing a final approval, the underwriter will likely give you a “conditional approval.” This means they approve of the loan parameters and most of your documentation so far, but need a few more items for full approval.
Common conditions to meet for final approval include:
- Providing additional bank statements or pay stubs to give the lender a more complete financial picture
- Submitting gift letters if you received money from family or friends for your down payment or closing costs
- Verifying you have secured homeowners insurance if required
- Explaining any large transactions or anomalies in your bank statements
These requests are normal – the underwriter just wants to dot their i’s and cross their t’s before giving the official green light.
Once you submit the additional documentation and the underwriter reviews it, they will issue a “clear to close” notifying you that you are officially approved and ready to move forward.
The Closing Disclosure
At least 3 business days before your closing date, you’ll receive a Closing Disclosure (CD) from the lender. This form outlines the final terms of your mortgage loan.
You’ll want to compare the CD closely to the initial Loan Estimate (LE) you received when you first applied. Key terms like your interest rate and lender fees should be the same on both documents. If not, contact your loan officer right away to understand why.
Final Verifications
Even after the CD and final approval, your lender will likely conduct a few more final verifications:
- Credit check – They’ll pull your credit again to make sure nothing major has changed
- Income/employment – They may ask for the most recent pay stub or call your employer to confirm you’re still employed
- Appraisal – If it’s been a while since the initial appraisal, they may want a more current home value
As long as everything still checks out, you’ll receive a clear to close and can proceed to the closing appointment.
The Mortgage Closing
Closing day is finally here! To prepare:
- Review your CD closely so you understand all costs
- Bring a cashier’s check, wired funds, or certified check for your down payment and closing costs
- Set aside ample time – closings can take several hours
At closing, you’ll sign the final loan documents and the home will officially be yours once the lender disburses the funds.
Wet vs Dry Closings
One important point – find out if your lender does “wet” or “dry” closings.
- Wet closing – The lender provides the funding at closing. Also called “table funding.”
- Dry closing – The lender disburses funds a few days after closing.
If your lender does dry closings, the sellers will want assurance they’ll receive the money promptly. Discuss this with your real estate agent so there are no surprises.
Don’t Jeopardize Final Approval!
Once you have final approval, avoid major changes to your finances before closing that could cause the lender to rescind approval. For example:
- Taking on new debt like a car loan
- Opening new credit cards or other accounts
- Making a major purchase
Changes like these could alter your debt-to-income ratio or credit score, making you ineligible. Notify your lender if something comes up so they can advise you.
Loan Funding: You’re All Set!
The very last step is for the lender to fund the loan by disbursing the money to the seller. Once funded, your loan is complete and it’s time to celebrate!
The mortgage process has many moving parts, but taking it step-by-step makes it feel much more manageable. Keep your loan officer and real estate agent looped in along the way so you have a smooth final approval process. Before you know it, you’ll have the keys in hand to your new home!
Loan is conditionally approved
If your loan application presents an acceptable level of risk for the underwriting team, then they will grant you conditional loan approval. But you’re not in the clear just yet.
What does conditionally approved mean? A conditional loan approval means that the underwriter has signed off on the parameters of the loan and most of the documentation, but still needs a few more items before fully approving the borrower for the loan. At this stage in the mortgage process, your loan status is contingent on meeting those final conditions.
What conditions do you need to meet? In most cases, mortgage teams want to see additional documentation to verify your finances and get a more complete picture of your financial behavior. These documents often overlap with the materials requested leading up to initial underwriting approval.
Your best bet to get ahead of any loan application problems is to avoid extra debt (like a new car loan), maintain steady employment, and keep a close eye on your streams of income.
How long does it take to get final approval after conditional approval? The good news is that once your loan has been conditionally approved, you’re basically in the home stretch. That being said, your lender will likely need another 1–2 weeks to finalize your home loan and move forward with your closing date.
Loan is submitted to underwriting
The Underwriter begins the loan underwriting process, reviewing all documentation to determine whether you qualify for the mortgage. While the Loan Officer and Mortgage Consultant will do their best to submit a complete file during loan underwriting, an Underwriter may still have questions and/or require additional documentation to satisfy any conditions for a final approval.
What do underwriters do? Mortgage Underwriters review financial statements, employment records, housing market reports, home appraisal reports, and other documents to check that you can both afford the home loan you’re applying for, as well as that the home you’re buying provides sufficient collateral for the mortgage.
How long does underwriting take? Underwriters tend to be pretty thorough in their work, and they need ample time to conduct their reviews and assess the level of risk that each prospective borrower presents. As such, don’t be surprised if it takes several weeks to receive initial underwriting approval on your mortgage. Exact timelines will depend on the documentation you provide, the complexity of your financial circumstances and the underwriting team’s workload. The best thing you can do to help keep things moving along is to anticipate documentation needs and respond to requests as quickly as possible.
The Mortgage Process-Final Approval
FAQ
What does mortgage final approval mean?
Can a loan be denied after final approval?
How long after final approval is closing?
What is the final step in the mortgage approval process?