This section will give you a good idea of the mortgage loan process and the time frame involved. The knowledge will help you feel more comfortable with your lender as you go through the loan process and will also help you spot any red flags along the way if they should appear.
The type of loan you are applying for will determine the length of time required for the loan process in completing your loan. Different loan types require different documentation.
As an example, If you have good credit and lots of equity in your home and you are applying for a 2nd mortgage the lender may not require an appraisal. If you are getting a Line of credit on your equity, that documentation can be completed with some lenders in a matter of days. If you qualify for automated processing (DU, or Loan Prospector) it is sometimes possible to close in less than 14 days.
Your loan officer should walk you through the process up front so you will know what to expect. Typically, most loans take 3 to 4 weeks to close.
The mortgage application process is where you fill out the application, sign various forms that authorize the lender to process your loan, and deliver your documentation requirements. (Bank statements, pay stubs, W2s, etc…) Obviously if you are doing this through the mail it can take a week or more but if you go into the office it usually only takes an hour or so. You should understand that the next process cannot begin until these documents are completed and or received.
When all of your documentation is received it then goes to a processor who verifies and validates all of the information to be true and correct. Verification requests may be sent to your employers, mortgage holder/landlord and lending institutions. This is done by fax when possible. It is usually during this time frame that the appraisal and the title policy are ordered.
When all the information is collected the processor then verifies that basic lender loan requirements have been met. The file is then packaged in a manner the lender specifies. The completed package (including the appraisal and title report) is then sent to the underwriting department either in house or to a lender-specified location.
The processing of your loan usually takes about one to two weeks but it can often be delayed when third parties do not respond to the validation requests or appraisals are delayed. If your loan qualifies for DU (Desk top Underwriting) or Loan Prospector, these are computer automated systems, the documentation requirements are often cut in half and the process can be completed in three to five days depending on the volume of loans the processor has.
The underwriter reviews your loan package to make sure it conforms to all the guidelines required for that loan product. They also review the appraisal and title report and may do additional validation of employment, mortgage payments, and credit. And, anything else they feel is necessary to document your loan. They have ultimate power and decision authority over the approval of your loan. The time required to do this is driven by the volume in the market. If the market is flooded I have seen it take two weeks but under normal conditions it only takes three to five days.
Automated Mortgage Underwriting
Most lenders today use Automated Underwriting (by computer). The advantage is less documentation and it speeds up the process. The computer actually makes the approval decision and the underwriter only reviews the supporting documentation and the appraisal. However, if any documentation is missing, inaccurate, or does not agree with the 1003 (application), the loan will be kicked out of this system until documentation requirements are met or the loan is turned down or resubmitted. This can cause delays but they are usually resolved quickly. Automated Underwriting can be completed in just a matter of hours. But, ..If the market is flooded expect it to take longer.
Conditions To Close
When the underwriter is done reviewing your loan she will send “conditions to close” to your loan officer. These are normally just requirements for further documentation to support your file. When these needs have been satisfied the underwriter will give a final approval and “clear to close”.
Clear To Close
When the loan officer gets the clear to close he then schedules and coordinates with all the parties the time and location to sign the final documents to close the loan. This normally only takes an hour to schedule.
When everything is scheduled the lender then draws the document package and sends it to the closing company. This can be done by overnight delivery, fax, or electronically. It can take one to two days. You meet, sign the papers, and pick up the keys.