Mortgage loans are the backbone of the residential real estate industry. Most homebuyers cannot afford the purchase price of houses outright. Instead, they will take out a home loan and agree to pay them back over time in exchange for ownership of their homes. Whether you are a first-time homebuyer or have bought several houses, purchasing property without a mortgage loan is difficult.
Lenders must assess each borrower’s risk before deciding whether or not to offer these home loans. The mortgage process involves the borrower meeting specific requirements to be approved for the funds, known as mortgage approval.
Lenders will analyze a person’s credit report, credit history, estimated closing costs, financial information, including how often they will change jobs, and more to determine if they qualify. We’ll review everything you need to know, including how long does it take.
What is Mortgage Approval?
The mortgage approval process involves assessing an individual borrower, delving into their finances, and determining whether they qualify for a home loan. To be approved, the prospective buyer must meet the qualification standards for the type of loan and the individual lender. Sometimes, these requirements are flexible, depending on the lender’s whim.
Some borrowers will be pre-approved for a loan. Pre-approval is a fast process with a mortgage professional, and those who may qualify will often receive a pre-approval letter so they can begin looking for a home.
However, it’s important to note that pre-approval only means you are more likely to be approved; approval still requires in-depth knowledge about finances, and a lender may back out, even if you already received your pre-approval letter.
Key Steps in the Mortgage Approval Process
The mortgage approval process involves numerous steps. As a potential borrower, you cannot purchase a home without your mortgage approval. First, you can apply for a mortgage pre-approval for a certain amount. Pre-approval does not mean you automatically qualify for a loan. You still must undergo the approval process after pre-approval.
Then, you will complete the loan application, providing information about your financial background. Once the loan is processed, the underwriting stage begins, which involves a loan officer analyzing your credentials and determining whether you are eligible to borrow money. Once you get the mortgage approved, you can buy the house and pick a closing date.
Factors Affecting Mortgage Approval Time
The approval process can take time. How long does it take? It could take just a few days or weeks to complete in some circumstances, but potential delays could make it drag on for much longer. Here are some factors that will affect the timeline of the mortgage approval process.
Buyer’s Financial Situation
Your financial situation is one of the significant elements affecting how fast final approval may occur. Most lenders will look at your credit report, credit score, income, debt, and employment history to assess your risk as a borrower. Typically, the more unstable your finances are, the less likely you are to have your home loan approved.
There may be flexibility if you are on the edge of some qualifications to get a mortgage. In that case, the loan officer may request additional documentation, such as bank statements, pay stubs, tax returns, or other documents, further delaying the final approval. They may be flexible if your credit score is only a few points shy of the minimum requirement.
Loan Type and Complexity
The type of loan you are applying for will also dictate the number of steps involved in loan approval and how long they take. A conventional loan can take anywhere from one to three weeks on average. FHA loans are sometimes faster because of the lower credit score requirements. VA loans can also be processed rather quickly.
On the other hand, a USDA loan often takes longer because the property’s location must be verified. Different loans require a different credit score, and often have different interest rates. Working with an experienced lender to get a mortgage is crucial to ensure you understand the qualifications.
Other loan features will affect the processing time, such as the down payment size, cash gifts from family members, and interest rates. The more complex your loan, the more likely it will take time for final approval.
Completeness of Documentation
If you are well-prepared for the mortgage application process, it can speed up the final approval. Provide complete financial documents from the start, including bank statements, any new debt you have acquired, pay stubs, current credit score, and tax returns.
Mortgage Lender Workload and Efficiency
The mortgage lender you work with may handle a large number of clients. Depending on the size of their staff and the backlog of mortgage applications, this could also affect your timeline. Even if you have been pre-approved for a loan with your lender, the number of other borrowers whose applications are being processed could slow down your final approval.
Appraisal and Underwriting Process
The approval process is at the mercy of other events, such as the property appraisal, title search, and underwriting review. All financial information is verified during underwriting, even if you already met pre-qualification standards. This includes verifying your identity, such as with a driver’s license.
If there are issues with the property title, this could hold up the finalization of your mortgage agreement. Additionally, if the home appraisal reveals that the property is worth much less than the asking price during a home inspection, the lender may delay approval until the price can be renegotiated.
Typical Mortgage Approval Timeframes
Since numerous moving parts exist when pursuing a home purchase, borrowers must understand the timeline for their home search and mortgage approval. Here are a few typical timelines that will affect how soon you can purchase your new home.
Pre-Approval
Mortgage pre-approval is not a requirement to buy a house, but many lenders recommend it. If you have a mortgage pre-approval letter, it allows you to finance a home purchase faster, making you an appealing buyer to the seller.
Since mortgage pre-approval is a preliminary assessment less intense than full loan underwriting, it typically takes just a few days, and it can give you an idea of your future interest rates. Once you have your mortgage pre-approval letter, you can make offers and start house hunting.
Full Mortgage Approval
If you have made an offer that the seller has accepted, it is time to finalize your mortgage. Full approval can take much longer than pre-qualification. It could take a few weeks to several months depending on the aforementioned factors.
Tips for Expediting Mortgage Approval
Once you find the right mortgage lender for your needs, awaiting final approval for your loan amount can be stressful. You can avoid some of the delays in this process by following these helpful tips.
Get Pre-Approved Early
As soon as you are ready to search for a new home, you should look into getting pre-approved for a specific loan amount. Getting pre-qualified will help you understand your budget for a new house and demonstrate to sellers that you are serious about purchasing their properties. Mortgage pre-approval will also demonstrate financial readiness to the lender, potentially speeding up the underwriting process once you seek final approval.
Provide Complete and Accurate Documentation
Even if you get pre-approved for a loan, the full mortgage may take longer if you do not have all your documents ready. Keep your finances updated and gather all relevant documents before applying for your loan to avoid potential delays. Keep all financial documents, including pay stubs and bank statements you receive while awaiting final approval.
Maintain Good Communication with Your Lender
Strong communication with your lender can also expedite the mortgage approval process. Don’t hesitate to contact your designated officer with questions about your application’s status. If you receive an email or phone call from the loan officer requesting more information, respond as quickly as possible.
Benefits of Selling to a Cash Home Buyer
Waiting for a buyer to approve their mortgage loan can be frustrating for sellers. If time is of the essence, consider selling to a different type of buyer. Cash home buyers keep funds on hand to complete quick transactions, allowing a much faster closing process.
Cash buyers offer more certainty surrounding the sale since financing delays or issues won’t derail the deal. Sellers can save money with a cash buyer because these companies usually take properties as is. That means there are no cleaning costs, repair expenses, or real estate agent commission fees to pay.
Bypass Long Mortgage Approval from Buyers by Contacting A-List Properties
If you want to bypass the typical mortgage approval timeline, you can sell your house as-is to A-List Properties. Our team will purchase your home no matter the reason for selling it. With cash on hand for any deal, we can close within two weeks once you accept our no-obligation cash offer.
If you are worried about the average time to approve a loan and how that may affect your selling timeline, call A-List Properties today at 972-526-7042 or complete the online form to request a fair cash offer.
Zach Shelley
Zach Shelley is a seasoned real estate investor with a diverse network spanning across the nation. As the founder of his own real estate venture, Zach is committed to offering innovative solutions to homeowners facing various real estate challenges.. Through his dedication and strategic approach, Zach continues to make a significant impact in the real estate industry, providing homeowners with alternative pathways to navigate their property transactions.
