With your documents tracked down and submitted, the loan application is finally complete. Now comes the hardest part of the home buying process, especially for first-time buyers: the waiting period.
Paying careful attention to detail throughout the process and maintaining realistic expectations can help make the wait for loan approval as quick and painless as possible.
Here’s a look into what’s happening behind the scenes to help you better understand the process and what you can do to make it easier:
After the application is filed
After you’ve finished your loan application and submitted all of the corresponding documents, the loan moves on to processing. During processing, all of the documents and information provided on the application will be reviewed and verified with third parties. This includes your employment history, Social Security information, disability or retirement income (if applicable), tax filing validation and credit report.
“We go through [the applicant’s] documents, but we also have to verify things with third parties,” says Jules Deas, loan officer with SunTrust Mortgage. Depending on the availability and response time of the third parties, this process can be fairly involved. “For example,” Deas says, “lenders may need landlords to verify rent payment history, employers to break down pay structure and creditors to update errors on credit reports.”
At the same time your documents are being processed, an appraisal of the home is completed and included in the application. Once this is complete, the application and supporting documentation—including the home appraisal and your determined debt ratio—are passed along to an underwriter, who approves or declines the loan and determines any conditions necessary for the loan to close, says Greg McBride, chief financial analyst at Bankrate.com.
Once your loan has been approved, the next step will be meeting any closing conditions. Often this requires you as the buyer to submit further documentation or provide clarity around any final questions the lender may have. When all conditions are cleared, you’ll be ready to accept, sign and close on the loan.
What is a realistic timeframe?
“It ultimately depends on the borrower’s specific situation,” McBride says, but from beginning to end the loan approval process is typically 30 to 60 days. “It can be longer, but it can also be quicker.”
Much of this depends on the thoroughness and accuracy of the information provided. Undisclosed details can cause delays, as applicants have to provide updated information for review. Being as thorough as possible upfront and disclosing everything will avoid much of the back and forth that can be a pain point, Deas says.
The timeframe also depends on how busy the lending office is, how quickly third-party sources respond and the results of the property appraisal. “If the appraisal comes in low, then that can put things back to square one,” McBride says.
Get pre-approved... and stay pre-approved
Pre-approval1 is a very important step in the process. It helps to be pre-approved “even before you start house shopping,” McBride says. While the parameters around pre-approval may vary from lender to lender, in general, getting pre-approved before you submit a loan application can help speed up the process, and in addition, may be a prerequisite for homeowners to consider your purchase offer, Deas says.
“Submit your information and respond to any questions from your lender in a timely fashion,” McBride says. In addition, don’t get nervous when you have to submit extensive information, Deas says. “Lenders are required to be really specific.”
And lastly, “don’t quit your job, buy a new car or open or close any lines of credit before you’ve closed on the loan,” McBride says. Any changes to your credit or employment while your loan is processing can affect approval, and taking out a new line of credit can alter your debt ratio, preventing the underwriter from getting the loan approved.
You may find the waiting period for the approval of your first home loan passes slowly, but being cooperative and transparent with your loan officer throughout the process can help shorten the time until you’re handed the keys.