Ready to take the next step in your home-buying journey and apply for a mortgage? Learn why the mortgage approval process might take longer than you’d expect.
If you bought a home before the financial crash of 2008, you probably enjoyed a relatively easy and quick mortgage underwriting process. These days, there are a lot of new rules in place to make sure that lenders aren’t preying on buyers by selling them mortgage products that they can’t afford. Meanwhile, underwriters (the people assessing your finances) want to take extra care to ensure buyers aren’t a risk. These are just a couple of reasons why getting approved for a mortgage can be a lengthy process during the home-buying transaction, which may come as a surprise if you’re a first-time home buyer.
We’re here to unpack the things you need to know about getting a mortgage loan approval, what the mortgage approval timeline looks like, and why a little patience goes a long way when preparing to buy a home.
How Long Does It Take to Close on a House?
If you recently applied for a mortgage, you have a little while to wait before you will be given the all-clear to close. The length of time it takes is dependent on your financial situation, as well as the different parties that you’ll be working with throughout the mortgage approval process. So, how long does it take to get a mortgage approved before you can close? The average mortgage process takes 49 days from application to close.
This may seem like a long time—especially if you’ve already found a new home that you love—but the time to close can vary depending on how hot or cold your market is. The size of your lender can also influence how long it takes to close on a house. Larger lenders will take longer to close, simply because the mortgage application process goes through more sets of hands to complete the underwriting process. While closing in a normal market with a small lender can take as little as 30 days, market factors and the underwriting process can easily extend to 45 or 60 days.
Reasons Getting a Mortgage Takes So Long
A fast mortgage approval process has all but disappeared in today’s market. The main reason that getting approved for a mortgage takes so long these days is that, in 2014, the Consumer Financial Protection Bureau established new mortgage underwriting standards designed to address industry issues that contributed to the Great Recession in 2008. Lenders are now required to extensively document a borrower’s ability to repay a loan, whether you’ve had a mortgage loan before or if this is a first-time mortgage loan. This can mean collecting more documentation when you open your application and asking for backup documentation along the way. At least half a dozen people will need to look over your mortgage application, and each one of them could ask for additional documentation of your income and assets. The larger the lender, the more people who will need to look over your application before delivering your mortgage approval letter.
It’s not all about documenting your ability to repay, though. Here are a few more factors that can affect the length of your mortgage approval process:
- When mortgage rates are low, mortgage lenders are understandably busier. If you’re trying to get a mortgage approval in a hot market, your lender will be dealing with a slew of other mortgage applications and it will take longer to complete all of them.
- Appraisal guidelines are stricter than they used to be, making the process more lengthy.
- If the home doesn’t appraise at or above the sale price, it can cause additional delays or even cause your mortgage approval to fall through.
- If you take advantage of a government-backed loan product, such as an FHA loan, you might need additional inspections or appraisals.
- Your lender also needs to perform a title search on the property, and if it comes up with a lien or judgment against it, that could delay closing while the issue gets resolved.
How to Get Fast Mortgage Approval
You may not be able to control how much the house you’re buying appraises for or whether the title is clear, but there are ways you can speed up the mortgage approval process.
Before you even start the home buying process, clear up any issues with your credit, because pulling your credit will be one of the first steps in getting approved for a mortgage. When you’re ready to start your mortgage application, have the following documentation ready to hand to your lender right away:
- Verification of your last two years of employment, including contact info and dates
- Copies of your Social Security card and driver’s license or state-issued ID
- Your last two years of W2 forms (or 1099 forms if you’re self-employed)
- Complete copies of your last two years of tax returns
- Your last two months of pay stubs
- All pages of your last two months of bank statements
- Current retirement account statements
- Documentation to show the source of any recent cash deposits
- Documentation of your ownership of any other real estate or assets
- Contact information for your homeowners insurance provider
Additionally, at some point during the mortgage approval process, you might receive mortgage loan conditional approval. This means that although the lender has reviewed all of your documentation and agrees to the terms of your loan, you still need to meet certain conditions before you receive your final mortgage approval letter. Conditions might be related to the house’s appraisal going through or the lender receiving other supporting pieces of documentation for your application.
Your lender might need additional documentation, depending on your financial situation, before granting your final mortgage approval. For example, if you’re looking to get a first-time home buyer mortgage, you may be asked to provide your rental history to prove that you paid on time every month.
If you haven’t heard from your lender, don’t hesitate to reach out and see if there is any further documentation to provide. Just remember that these things take time! Getting approved for a mortgage is a verification process that will protect you and the lender in the long run, and you’ll be in your new house before you know it.
Once you’ve closed on your new home, American Home Shield is here to help you protect the systems and appliances you use every day with a home warranty plan that meets your needs and budget. We also have great advice about repairing, renovating, and beautifying your home, inside and out.