Understanding the Mortgage Approval Process Post-Submission

The timeline for mortgage loan approval can vary, but generally, once you submit all your documents and paperwork, you can expect to receive a decision within 3 to 10 business days. This article will guide you through the process and factors that can affect the timeline.

Lender Processing Time

Different lenders have varying processing times based on their workload and efficiency. Some lenders may be more backlogged and require additional time to review applications, while others may be more streamlined and speedy.

Complexity of Your Application

The complexity of your financial situation can significantly impact the approval timeline. A straightforward application with clear and straightforward information is likely to be processed faster than one with complications or additional verifications required.

Underwriting Process

This is the stage where your application is thoroughly reviewed to ensure that all criteria for loan approval are met. Some lenders may take longer to complete this process if they need to request additional information. This can extend the timeline, with approvals ranging from a few business days to up to two weeks or more.

Additionally, the approval process may include a period where closing can take another few weeks. This step is crucial to ensure that the property and financing meet all legal and financial requirements. If you have specific concerns or need updates, it's a good idea to reach out to your lender directly. Typically, staying in regular communication can help you stay informed about the status of your application.

What Was Involved in Your “Pre-Approval”

The nature of your pre-approval can greatly affect how quickly you receive final approval. Some lenders offer a superficial pre-approval process that only involves checking your credit and taking your word for your income. This type of pre-approval is not reliable and may not hold much weight with potential sellers.

For a thorough pre-approval, the lender should at a minimum:

Take a complete application from the borrower. Collect income documentation such as: Current pay stub Most recent W-2 At least one full tax return for self-employed borrowers or those owning rental property Complete asset documentation, including: Current month’s bank statements An explanation of any large deposits more than 50% of the qualifying income Valid photo ID Complete work and residence history for at least two years Secure a “tri-merge” credit report from all three credit bureaus Submit the loan application to the Automated Underwriting System and receive an outcome of “Approve/Eligible” or “LP Accept”

While the real approval process is highly competitive, many lenders still use a TBD approval in a market like the one in February 2022. A TBD approval is essentially a loan approval without a specific property in mind, which can be incredibly advantageous.

Once a pre-approved borrower receives an offer, they will need to secure additional documentation, such as a fully ratified purchase contract, along with a preliminary title report. This can take up to 48 to 72 hours once the underwriting conditions are met. An appraisal, which can take up to two weeks, will also be necessary.

Swift approvals are a sign of a well-managed loan process, so if a lender keeps a borrower in the dark for days or weeks, it's a sign that they may not be doing their job correctly.