Once your loan is approved and your inspection, appraisal and title search are complete, your lender will set a closing date and let you know exactly how much money you'll need to bring to your closing. Close on your home.
The five stages of a mortgage typically encompass origination, underwriting, closing, funding, and servicing. Origination involves the initial application and documentation by the borrower. Underwriting refers to the comprehensive review process by the lender to evaluate the risk and decide on loan approval.
Completion
Once you've accepted the mortgage offer from your lender, there are only 2 major steps left. Signing contracts and the transference of your deposit money. Your solicitor will contact you to arrange a date to sign contacts and confirm the transference of your deposit.
Once the mortgage underwriter is satisfied with your application, the appraisal and title search, your loan will be deemed clear to close. At that point, you can move forward with closing on the property.
The term “clear to close” means the Underwriter has signed-off on all documents and issued a final approval. You meet all of your lenders' requirements to qualify for a mortgage, and your mortgage team has been given the green light to move forward with your home loan.
Simply, if you're preapproved for a mortgage there is still a possibility you could be denied after. In fact, approximately 5,741 VA loans were preapproved but not accepted according to 2022 HMDA data. Let's explore more about what it means to be preapproved for a home loan and why you could be denied after.
Underwriters are the decision makers because they look at your application and will determine whether you receive approval. They usually have the final say as to whether you'll receive a loan or insurance policy.
Lenders evaluate current debts as part of their final checks before making mortgage offers. This assessment helps them gauge whether taking on a new loan would overextend their finances or if they're in a stable position to manage additional monthly payments alongside existing obligations.
Once the underwriter has determined that your loan is fit for approval, you'll be cleared to close. At this point, you'll receive a Closing Disclosure.
Timing Requirements – The “3/7/3 Rule”
The initial Truth in Lending Statement must be delivered to the consumer within 3 business days of the receipt of the loan application by the lender. The TILA statement is presumed to be delivered to the consumer 3 business days after it is mailed.
The 28% mortgage rule states that you should spend 28% or less of your monthly gross income on your mortgage payment (including principal, interest, taxes and insurance). To gauge how much you can afford using this rule, multiply your monthly gross income by 28%.
The Underwriter issues the Clear To Close (CTC) once all the conditions meet the guidelines. The Closing Department then sends the title company the “loan instructions” so they can prepare the final Closing Disclosure (CD). The final Closing Disclosure (CD) will provide the exact amount of money due at closing.
You've made it to the last step in the house closing process: signing the final paperwork. Closings usually take place at a title company with a closing agent and any co-borrower(s). There are also options now that allow you to do all of this online.
Mortgage underwriting can take anywhere from a few days to several weeks, depending on your application and financial situation. During the underwriting process, the mortgage lender will verify your income, assets, debts, credit and expenses.
The mortgage underwriting process can take up to 60 days. The standard turnaround time to take a mortgage purchase loan from contract to funding usually takes 30 to 45 days, but most lenders will work to have the mortgage underwritten within 30 days to meet the agreed upon closing date set in the purchase contract.
Key takeaways about mortgage denials in underwriting
Your loan can be denied if you have incomplete or missing information on your loan application or don't meet minimum mortgage requirements. Denials are less common on mortgage loan applications.
Lenders typically consider various factors before approving a loan application. By focusing on building a good credit score, reducing debt, improving your debt-to-income ratio, and providing accurate documentation, you can enhance your eligibility for loan approval.
To begin with, yes. Many lenders hire external companies to double-check income, debts, and assets before signing closing documents. If you have significant changes in your credit, income, or funds needed for closing, you may be denied the loan.
Federal Housing Administration loans: 14.4% denial rate. Jumbo loans: 17.8% denial rate. Conventional conforming loans: 7.6% denial rate. Refinance loans: 24.7% denial rate.
Even after you've agreed to a price and signed a contract, it's possible for a home sale to fall apart. Data from the National Association of Realtors shows that 5 percent of contracts were terminated in the final quarter of 2022, and 15 percent were delayed.
15. Closing time. Once your mortgage application has been approved, you'll take the last steps to officially close on your home. After you've put your signature on the last line on the last page, you're a proud new homeowner!
The final stage of the loan process is the disbursement. The housing finance company will disburse the loan on completion of technical appraisal of the property, documentation and 'own contribution' being made in full. You can then make your request for disbursement – offline or online.
Most buyers won't have to wait very long to meet at the closing table once they're clear to close. You should expect the process to follow the clear-to-close 3-day rule, where you receive your Closing Disclosure 3 business days before your closing date.