How Long After Getting Pre-approved for a Loan Can You Close on a House: A Comprehensive Guide
Getting pre-approved for a loan is an essential step before starting to look at houses. However, the timeline from pre-approval to closing the deal varies depending on several factors. In this guide, we'll explore the typical process, average timelines, and what you can expect from the entire home buying journey.
Understanding Pre-Approval
A pre-approval is not a commitment to a loan; it's a preliminary overview of your financial condition to determine how much loan you can qualify for. When you get pre-approved, the loan officer collects your preliminary income and asset documents, creates a loan application, and submits it to the Automated Underwriting System (AUS).
Average Timeframes for Closing a Loan
In most cases, the process from obtaining pre-approval to closing can take around 30 days. However, this can vary greatly depending on individual circumstances. For example, in Texas, it often takes about a month, but it can be as fast as three weeks. Factors like seller availability, construction delays, and complex loan underwriting can affect the timeline significantly.
The Step-by-Step Process
After Receiving Pre-Approval
Once you receive pre-approval for a loan, you still have to go through the process of a loan application for the actual home you want to purchase and clear through all the underwriting needed to secure the loan.
1. Accepting an Offer on a Home
Once you’ve accepted an offer on a home, your next steps include:
Updating your income and asset documentation: This typically involves current month's pay stubs and two months' bank statements. Your Realtor opens escrow for you. Your loan officer requests a preliminary title report from the title company and obtains accurate fees from the escrow company to prepare a Loan Estimate (LE). You sign the LE to acknowledge you’ve seen it.2. The Appraisal Process
While you wait for the appraisal, your loan officer’s team is busy preparing your loan for submission to the underwriter. This process can take 2-3 business days. Upon receiving the appraisal, the underwriter will review your loan application and supporting documents.
3. Underwriting and Clear-to-Close
The underwriter will review your loan application and supporting documents. They will typically have a “turn time” of 24-48 hours. If there are no conditions, your loan should be approved at this point. If there are conditions (which are usually routine items like recent pay stubs or bank statements), allow another 24-48 hours for these to be addressed.
4. Loan Document Signing and Closing
Once your loan is approved and the appraisal has been received, the lender will issue a Closing Disclosure (CD). This is the final document before closing. Typically, after signing the CD, you can close the loan no sooner than three business days later, depending on the lender's policies.
The loan officer will return the package to escrow, which coordinates with the lender’s funding department to reconcile all the numbers and ensure everything is accurate. The lender will then wire the funds to the escrow, and the escrow officer will release documents for recording with the county and disburse funds to the parties involved.
Conclusion
The timeline from pre-approval to closing can vary widely, but most escrow processes today run for around 30 days. Closing in two weeks can happen but is comparatively rare due to the many moving parts in modern mortgage transactions. It's essential to stay informed and plan accordingly to ensure a smooth home buying process.
Keywords: pre-approval, loan origination, home closing