How Long Does Mortgage Underwriting Take? How to Tell How Long You’ll Wait

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Before you start shopping for your home, you will be advised by your real estate agent to choose your mortgage provider and get preapproved for a mortgage so you know what price range you can afford.

But that is only a preliminary step to getting final approval for a mortgage.

After you have signed a contract on the home of your dreams, you must submit a formal mortgage application. At that point, the mortgage company will take a deeper dive on you and your transaction.

That process is called mortgage underwriting, and it involves several requirements on your part — and action steps on the underwriter’s part — that can have an impact on how long it will take to close on your home purchase.

We’ve asked Richard Helali, Loan Officer and Sales Lead at HomeLight, to pull back the curtain to explain what happens during mortgage underwriting. How long will it take? What happens during underwriting? What can you do to make sure everything moves forward more smoothly?

We’ve got the answers!

A person waiting for mortgage underwriting to take place.
Source: (Dawid Zawiła / Unsplash)

What is mortgage underwriting?

A mortgage underwriter’s job is to determine the relative risk the lender will incur if they provide you with a mortgage. To accomplish this, the underwriter will consider collateral, credit, capacity, and cash, sometimes called the “four Cs” of underwriting.

Collateral is the value and condition of the property you are purchasing. This is important to the lender because if you default, it is how the lender can recover its investment.

Credit, or your credit score, tells the story of your credit history — not only how much debt you have incurred but how well you have managed your payments for that debt.

Capacity is your income and the stability of that income, which help indicate whether you will be able to make the payments on your mortgage. An underwriter will consider your employment history, including how much you are earning, how long you have been at that salary level, and how long you’re likely to keep that level of income in the future.

Cash is your liquid assets, including bank accounts, investments you have access to (such as money market funds), and funds that are gifted to you for your down payment or provided through a program.

“The underwriter has the keys to the castle,” Helali says. “Their job is to make sure that your scenario actually lines up with the guidelines for the mortgage program and amount you’re applying for.”

For instance, the requirements concerning your credit score or the amount of your down payment can be quite different if you are applying for a conventional loan instead of an FHA or VA loan.

“The underwriter also has to do the calculations of your income and available funds,” he adds. “They will look back to see where your down payment funds are coming from to make sure that everything is actually eligible.

“They are the gatekeepers, and their job is to make sure that everything and anything that needs to be on this application is in line and makes sense. Every single item has to be signed off on to say yes, you are eligible — or no, you are not eligible.”

How long does mortgage underwriting take?

Historically, homebuyers could expect getting a mortgage to take between 30 and 45 days from the contract signing to the final closing day. That average time has ticked up, according to ICE Mortgage Technology, a company that processes up to one-third of U.S. loans through its technology. ICE reported it took an average of 58 days to close a loan in January 2021, and between 50 and 52 days throughout the spring.

A big component of that time period is the underwriting process itself.

Depending on the type of loan and the complexity of the borrower’s situation, underwriting can take as little as a few days to as long as six weeks.

“Once an underwriter starts working on the file, it normally takes one to three hours. It depends on how complicated or easy your file is.”

The time it takes to complete the underwriting process could also be delayed by outside factors. For instance, the coronavirus pandemic caused an uptick in both homebuying and refinancing, which meant underwriters were busy!

Your underwriter could also be delayed if they are waiting on your documentation.

Let’s break it down to get a handle on what happens throughout the process and what could cause delays.

Papers used when completing mortgage underwriting.
Source: (Kate Macate / Unsplash)

What is involved in the mortgage underwriting process?

There are three major steps in the mortgage underwriting process: review, documentation, and determination.

The review: 1 to 3 days

In the first few days, the underwriter will look at the documentation you have submitted. This includes documentation on your income, assets, and debts, the value of the home you are buying, and your credit score.

According to Helali, the underwriter starts with the application itself, which includes your name, where you work, how much you earn, and what other assets you may have. But the underwriter isn’t going to take all this information at face value.

“The underwriter also wants to see the documentation supporting it,” Helali says. “You say: ‘I make $100,000 a year.’ The underwriter says, ‘That sounds good — but show me the $100,000. Show me your W-2 and pay stubs.’ They are always going to look at what’s on the application and compare it to the documentation supporting it.”

The documentation: 7 to 14 days

Often, the underwriter will require further documentation to support the information provided on the application. For instance, if you say you are going to put a $100,000 down payment on the home, but your documentation shows that you only have $50,000 in the bank, the lender is going to ask for further clarification.

“The underwriter will send a message back to the client to say, ‘thanks for your application but we’re missing all these items,’” Helali notes. “From there, the client has to provide those items, and then it goes back in line for underwriting again.”

This gets more complicated if, for example, you are self-employed, or you have another business on the side.

“If somebody is self-employed, in addition to any tax forms and their tax returns for the last two years, we would likely need a profit-and-loss statement or a balance sheet from their business for the current year,” Helali explains.

“Not only will it take a little bit longer for clients to provide that information, but it’s not as easy for the underwriter as it would be if they are comparing your W-2 and your pay stubs and making a few quick calculations. That process is going to be more complicated, and it may require the underwriter to go through the taxes line by line to figure out what they can and can’t use toward income.”

Helali also says that if you have multiple businesses or multiple sources of income, it can make your file complicated because it presents more details for the lender to sort out.

The determination: 1 to 3 days

The last step is the approval process. Once the underwriter has all the information requested, they will approve or deny the loan, or they may approve the loan with conditions.

“Conditional approval is when the underwriter says you are approved for a loan for $500,000, but the condition is that they need to see ABC documentation from you,” Helali explains. “For instance, if you say you have a gift coming from mom or dad for $20,000 to help with the down payment, but you don’t have it yet, we may take your word for it for now — but your approval is only valid if you can provide the proof of having it in hand before the closing.”

Helali says other conditions may include a requirement that you pay off a certain debt, or that you sell your current home.

If for any reason you cannot fulfill the conditions or you cannot provide the documentation the lender is asking for, it is crucial for you to meet as soon as possible with your lender to see if there are other remedies that will keep you in the game, Helali advises.

What can I do to speed up the mortgage underwriting process?

Although there’s not much you can do about a clogged mortgage application pipeline, there are steps you can take to ensure that when your number does come up, the underwriter can move quickly on your application.

Helali says the first step is to do some research online and play with mortgage calculators to get an idea of what you can afford.

“Getting pre-qualified is very important because you want to make sure that you’re looking in the right price range,” he says.

You can also shop around for a lender that does pre-underwriting, where the lender takes care of some of the heavy lifting before you even start shopping for a house.

Most importantly, make sure that you have compiled and submitted every document that the underwriter has requested.

And finally, stay in touch! If your real estate agent or lender reaches out to you for additional information, respond promptly.

A house that has a mortgage on it.
Source: (Roger Starnes Sr / Unsplash)

A final note

Buying a home is an expensive proposition. The best gift you can give yourself during this process is to ask questions every step of the way, Helali says.

“Come to the process with an open mind, and ask as many questions as you feel you need to ask,” Helali says. “When it comes to buying a house, you have to trust your lender, and you have to trust your real estate agent. You have to find the right people to help you, even if it means interviewing ten different loan officers.”

Contact one of our HomeLight agents to get all the answers you need throughout the homebuying process.

Header Image Source: (Steve Johnson / Unsplash)