Most people go through six distinct stages when they are looking for a new mortgage:
The mortgage approval process can take anywhere from 30 days to several months, depending on the status of the market and your personal circumstances. Read on to learn what to expect from the process and what you can do to speed it up.
Getting pre-approved is the first step in your journey of buying a home. But even with a pre-approval, a mortgage can be denied if there are changes to your credit history or financial situation. Working with buyers, we know how heartbreaking it can be to find out your mortgage has been denied days before closing.
The biggest mortgage fraud red flags relate to phony loan applications, credit documentation discrepancies, appraisal and property scams along with loan package fraud.
The Three C's of Underwriting
Credit reputation, capacity, and collateral are things that your underwriter will use to access your loan eligibility: Credit Reputation — Your credit score, payment history, accounts, and more will help determine your loan eligibility.
In a nutshell. After you receive a mortgage offer, you'll need to accept it by signing it and returning it to your lender. Then, it's just a case of cracking on with your house purchase! So, you've found your dream home, applied for a mortgage and finally got that offer you've been waiting for.
When it comes to mortgage lending, no news isn't necessarily good news. Particularly in today's economic climate, many lenders are struggling to meet closing deadlines, but don't readily offer up that information. When they finally do, it's often late in the process, which can put borrowers in real jeopardy.
Having a mortgage loan denied at closing is the worst and is much worse than a denial at the pre-approval stage. Although both denials hurt, each one requires a different game plan.
Largely due to the real estate market as well as the lending institution, this can easily extend to a month and a half, even two months. For example, in a normal market, many lenders are averaging just 30 days. Larger banks and credit unions, on the other hand, will often take longer than your average mortgage lender.
Property valuation and underwriting
Your lender will have an independent valuation of the property carried out, sometimes at your expense. After this, the mortgage underwriter will perform an in-depth review of your application, finances and your supporting documents, like bank statements and payslips.
Once you clear any conditions and get your mortgage approved, your home purchase is almost complete. The final step is closing day, which is when the lender funds your loan and pays the selling party in exchange for the title to the property.
A mortgage valuation does not mean that a mortgage is approved. Getting a mortgage valuation does not automatically mean that a mortgage is approved. This is because there are other requirements that the borrower needs to comply with.
How long does underwriting take? The underwriting process typically takes between three to six weeks. In many cases, a closing date for your loan and home purchase will be set based on how long the lender expects the mortgage underwriting process to take.
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.
Credit reports contain your credit history, which is a record of how you've managed debt payments. Lenders may look for: Delinquent accounts, meaning those paid more than 30 days late. Unpaid collections accounts.
Tip #1: Don't Apply For Any New Credit Lines During Underwriting. Any major financial changes and spending can cause problems during the underwriting process. New lines of credit or loans could interrupt this process. Also, avoid making any purchases that could decrease your assets.
How far back do mortgage lenders look at bank statements? Generally, mortgage lenders require the last 60 days of bank statements. To learn more about the documentation required to apply for a home loan, contact a loan officer today.
But you might not get a mortgage at all, if you fall into some of these traps: According to a NerdWallet report that looked at mortgage application data, 8% of mortgage applications were denied, and there were 58,000 more denials in 2020 than 2019 (though, to be fair, there were also more mortgage applications).
Lenders look at various aspects of your spending habits before making a decision. First, they'll take the time to evaluate your recurring expenses. In addition to looking at the way you spend your money each month, lenders will check for any outstanding debts and add up the total monthly payments.
Most often, loans are declined because of poor credit, insufficient income or an excessive debt-to-income ratio. Reviewing your credit report will help you identify what the issues were in your case.