Underwriting—the process by which mortgage lenders verify your assets, check your credit scores, and review your tax returns before they can approve a home loan—can take as little as two to three days. Typically, though, it takes over a week for a loan officer or lender to complete the process.
Underwriters consider factors like your credit history, your financial profile and a home appraisal when deciding on your loan. There are many steps involved in the underwriting process, which can take a few days or weeks to complete.
There are many reasons why an underwriter may deny your mortgage loan, such as a low income, an unsatisfactory credit history or a recent change in employment. If an underwriter denies your mortgage loan, try going to a smaller lender or addressing the issues that caused the denial in the first place.
The three primary factors that can disqualify you from getting an FHA loan are a high debt-to-income ratio, poor credit, or lack of funds to cover the required down payment, monthly mortgage payments or closing costs.
How often does an underwriter deny a loan? A mortgage underwriter typically denies about 1 in 10 mortgage loan applications. A mortgage loan application can be denied for many reasons, including a borrower's low credit score, recent employment change or high debt-to-income ratio.
Underwriting is the process of your lender verifying your income, assets, debt, credit and property details to issue final approval on your loan application. Underwriting happens behind the scenes, but that doesn't mean you won't be involved.
For this reason, the interaction between a loan officer and an underwriter is limited to a simple transfer of the borrower's facts and data. A loan officer may not attempt to influence the underwriter. Loan officers and underwriters are both crucial roles in the home buying process.
Key Takeaways
To help improve your chances of getting a loan, don't take out any new credit, change jobs, or miss any bill payments during the underwriting process. About 9% of mortgage applications to buy a home in the U.S. were denied in 2020, according to the Consumer Financial Protection Bureau.
Average Closing Time for an FHA Loan
It takes around 47 days to close on an FHA mortgage loan. FHA refinances are faster and take around 32 days to close on average. FHA loans generally close in a very similar timeframe to conventional loans but may require additional time at specific points in the process.
This comparison can offer valuable insights for borrowers as they navigate their mortgage options. Conventional Loans: In 2022, conventional loans had a denial rate of 7.6%, significantly lower than the FHA's 14.4%.
The Bottom Line
Your underwriter will ask for documents like tax returns and bank statements. They will look at your income, assets, debt, liability and credit report before giving you an approval or denial.
As a loan officer, one of the most important things that will accelerate the underwriting process and increase the chances of successful mortgage loan approval is providing your client's correct and most recent information. The data you provide to the underwriter for examination should be accurate and verifiable.
The best way to speed up the process is to make sure your paperwork for the lender or underwriter is complete. Complete paperwork and good documentation will allow your loan to sail through in as little as two to three days—if you're lucky, even in a single day.
You may be wondering how often underwriters denies loans? According to the mortgage data firm HSH.com, about 8% of mortgage applications are denied, though denial rates vary by location and loan type. For example, FHA loans have different requirements that may make getting the loan easier than other loan types.
You may end up pre-approved for a mortgage but then denied because of circumstances beyond your control. Requirements for mortgage loans can change, and lenders may adjust their underwriting guidelines.
Yes. A mortgage lender will look at any depository accounts on your bank statements — including checking and savings accounts, as well as any open lines of credit. Why would an underwriter deny a loan? There are plenty of reasons underwriters might deny a home purchase loan.
You may have heard the term before, but what does underwriting mean exactly? Mortgage underwriting is what happens behind the scenes once you submit your application. It's the process a lender uses to take an in-depth look at your credit and financial background to determine if you're eligible for a loan.
Once your FHA appraisal is complete, you must close on your loan within 180 days.
Credit is pulled at least once at the beginning of the approval process, and then again just prior to closing. Sometimes it's pulled in the middle if necessary, so it's important that you be conscious of your credit and the things that may impact your scores and approvability throughout the entire process.
After an underwriter has reviewed your finances, there are generally two answers you could receive for a loan status: Approved: If your loan is approved, you will be sent a commitment letter describing the terms for paying back your loan.
Your final conditions may include things like bringing in your down payment, paying off an outstanding judgment or closing certain accounts. Conditions can include just about anything that a lender needs to be confident that you can repay your mortgage as agreed.
It is important to note that underwriters should not be in actual contact with you. All questions and discussions should be handled through your lender or loan officer. An underwriter talking to you directly, or even knowing you personally, is a conflict of interest.