Applying for a mortgage may seem like a complicated, drawn-out process, but that doesn't necessarily have to be the case. Most lenders use a fairly standard home loan application, which asks you to disclose basic information about your financial situation. While the average loan will close within about 45 days of the lender receiving your application, the process can take a good two months, depending on the lender.
Mortgage underwriting is the process a lender, such as a bank or investment house, uses to determine whether the risk of extending a loan to a particular buyer is an acceptable one. Because it's based on many factors -- including the capacity of the borrower to pay back the loan, the credit history of the borrower, and any collateral the prospective buyer may be offering -- the process of underwriting, or determining the eligibility of a prospective client, can take from 48 hours to two weeks. Many direct lenders have in-house underwriters, who work very quickly. On the other hand, using a broker usually delays the process slightly, because they have to deliver the documents to the underwriter. However, there are some things you can do, if not to speed up the process, then at least to prevent untoward delays.
Application and Supporting Documents
Gather all the information you need ahead of time. Many lenders will not even review a loan application if any information is left out. At best, missing or incomplete information will slow down the process, because the underwriter will have to request the data they need to finish reviewing your file. Therefore, complete the entire loan application without leaving anything blank, including a complete two-year employment and housing history. Include your financial information with the loan application. The wheels of the underwriting process will turn more smoothly if all of your financial information is submitted, along with your application. Provide two recent pay stubs, your W-2's for the last two years, two years' tax returns with all statements, and bank statements for the last two months. If you're self-employed, also provide two years of business tax returns with all schedules. While you should not neglect to include alimony or child-support payments, neither should you overstate variable income from commissions.
If any of your personal or financial information needs clarification or explanation, include a letter to the underwriter. For example, if your company was bought, then changed names, inform them in the letter that the W-2s list two different company names, but are actually the same entity. Giving the underwriter a complete financial picture will prevent the file from being placed on hold while you gather the additional documents.
Conditional Approval and Appraisal
Once the underwriting process has been favorably concluded, the lender will immediately issue a conditional approval, but will then ask for an appraisal of the property. It can take anywhere from 48 hours to a couple of weeks for the appraiser to inspect the property, then turn in a full report. This report then goes back to the underwriter, who will look it over very carefully. If they do not find anything in the report that they do not agree with, they will usually issue a final approval within the week. This final underwriting usually takes only a few hours.
If you delay in providing any additional information that the underwriter has requested, there is a chance that they may set your file aside and not return to it until after they have finished underwriting the other loans assigned to them. Therefore, respond to any request for information as soon as possible.