All About Mortgages: How Long Does the Underwriting Process Take?

How Long Does the Underwriting Process Take

If you are planning to apply for a home loan for the purchase of your new house, you may have come across several terminologies that may have confused you. One of them would certainly have been the term ‘underwriting.’ There are several stages through which every loan application must go through. And the process of underwriting happens to be one of them. It is a long and tedious process for which you have no control over, but it is an absolute necessity to get approved for a home loan.

In this article, you will learn ‘how long does the underwriting process takes, what is underwriting and you will further examine how to speed up the process to minimize anxiety, if possible. This article is part of a series ‘All About Mortgages ‘that answers the questions, gives guidance, advice, for those who seek out general knowledge on the subject matter.

In this article we will seek out the following topics;

What is Underwriting?

In short, underwriting is “the process of making a final determination on approval or rejection of a loan application.”[i] The underwriting process entails the verification of the information that has been obtained from the borrower for the sole purpose of meeting the necessary underwriting requirements of the applicant’s creditworthiness.

In other words, to get a mortgage loan you first need to meet a mortgage loan officer. If you have met your mortgage loan officer, he/she must have requested you to submit all the documents necessary for verification of the loan. You may have thought that should be enough to grant you a mortgage loan? However, this is not the case. The underwriter must give the approval to sanction the loan. But who is an underwriter and ‘how long does the underwriting process take?’

After the loan application has been submitted to the mortgage officer, it is forwarded to an underwriter for the mortgage underwriting process. Every home loan request goes through the process of underwriting. In this process, the mortgage lender appoints an underwriter who facilitates the background check on the borrower to determine creditworthiness. He/she verifies the authenticity of the documents submitted by the borrower and the health of the applicant’s finances. It involves the evaluation of the applicant’s credit score, capacity to finance the loan, applicant’s employment history among other factors. It can take anywhere from a few days to four weeks and typically over a week for the underwriter to complete this process. All you can do is just sit back patiently and wait for the approval.

ResourceMortgages 101

What happens during the process of underwriting?

The only way to evaluate the borrower’s ability to pay back the loan is to investigate the borrower’s past financials, assets owned and debts outstanding. There are several factors that help in determining the borrower’s ability to pay back the loan. An underwriter must investigate each one of them. They include the applicant’s credit history and credit score, the capacity to pay back, and the collateral. Let us have a look at these factors.

Credit History and Credit Score

Every (most) individual has a credit score. The score signifies the creditworthiness of an individual. It measures the extent to which an individual adheres to his financial commitments whether the applicant pays their bills on time, the quantum of existing loans, whether the applicant has made any defaults on previous loan payments, etc. Here the underwriter investigates the applicant’s financial statements, for instance, the applicant’s bank account details, pay stubs, tax returns, and so forth. The underwriter also spends a great deal of time studying, analyzing, and interpreting the applicant’s credit report. This helps the underwriter get an insight into the applicant’s financial discipline. All these constraints cumulatively determine the applicant’s success in approval. A credit score of 620 is considered ideal by Freddie Mac. Thereby, meeting the minimum underwriting requirement for a credit score.

Capacity to Payback

Here the underwriter evaluates your ability to repay the loan. He/she investigates the applicant’s debt ratio, the balance of savings accounts, the estimated amount of cash in your hand after making the down payment, and the number of borrowers for the loan. The underwriter determines the amount of loan you can borrow depending upon the strength of your finances. Further, the applicant’s monthly income, expenditure, and other expenses help the underwriter estimate the amount of loan that you can borrow.

Collateral

Almost, every home loan needs to be secured against collateral. Generally, the home for which the loan is being bought is collateral or security. This ensures that in case of failure to pay the loan, the collateral (home itself) can cover the cost of the loan for the bank. The underwriter tries to measure the value of the property through property appraisals. The value of the home should be at least equal to or more than the value of the loan itself. The underwriter also investigates the type of home loan – whether it’s being purchased for a primary residence or for investment purposes. If it is for investment purposes the underwriting requirements may change significantly.

Additional Documentation

The underwriter might request you to submit additional documents or request an explanation on specific financial entries. For example, if the applicant had received a gift of $5,000 from a relative recently, it won’t be mentioned on the bank statements. It will just be a deposit. The underwriter absolutely has no idea about how this amount popped up in your bank account. To verify the source of this income, the underwriter may request the applicant to submit the details explaining the deposit. This is done to make sure that all the aspects of the applicant’s financials are investigated well before the final approval of a home loan.

The Approval Process

After carefully considering the factors and meeting the underwriter’s requirement, the underwriter evaluates and gives his/her approval. The underwriter first issues a conditional approval which necessarily certifies that the applicant is a good candidate for the loan. He/she may further specify certain conditions to be fulfilled, subsequent to which a final approval would be given. After this, the mortgage lender gets the value of the property appraised. An appraiser determines the value of the property and submits the report back to the mortgage lender. The report is then sent back to the underwriter who approves the report and gives his/her final approval. After this, the applicant’s mortgage is sanctioned within a few days.

ResourceMortgages For Dummies

Important Tips to Speed Up the Underwriting Process

Honestly, there is not much that you can do to fast forward the process of underwriting. No underwriter would want the loan application they have audited to turn bad. Keeping this in mind the underwriter will go into specific details of every aspect of an applicant’s finances. But there are a few things that the applicant could do to expedite the underwriting process, namely, keeping their documents in order, being fast to respond to the request of their mortgage lender, and always submit supplementary details to clear out any questionable discrepancies.

Keep Your Documents in Order   

If all your paperwork is complete and updated, it will help the underwriter in assessing your application better. All the required documents should be submitted in the prescribed format that would help in obtaining faster approval. The use of technology may be a big factor.

Be Fast to Respond    

Even after submitting your documents, the underwriter might ask you to furnish a letter of explanation to get certain details. You should be proactive and submit the requested documents immediately to avoid any unexpected delays.

Submit Supplementary Details     

You can submit details of unconventional large deposits. If you had a break in your employment history, you could furnish a statement stating the reason. It is very likely the underwriter will ask for information on these and it would be better to submit them beforehand. You may also inquire about the services of mortgage brokers who are well versed in the developments in the mortgage market to help you in your application process. The process of underwriting is indeed long and tedious but if you have all the documents in place then there is absolutely nothing that you need to worry about.

Final Thoughts on How Long Does the Underwriting Process Take?

Now that you have an answer to the question ‘how long does the underwriting process take? You should relax and prepare yourself. Ideally, it takes around a few days to four weeks and typically over a week for the loan to be finalized and approved. You can be prepared by working with your mortgage loan officer in handling all the necessary documents the underwriter will need to have the loan finalized.

Bibliography

[i] Guttentag, J. (2004). The Mortgage Encyclopedia: An Authoritative Guide to Mortgage Programs, Practices, Prices, and Pitfalls. New York, NY: McGraw-Hill Education.

This page may contain affiliate links. This website may contain content that comes from Amazon. This website and its pages are not intended to constitute legal, financial, or tax advice. The information on this website and its pages are not intended to constitute investment advice and all content are the views and opinions of the author(s), contributors, or administrators. Please read our disclaimer for more info.

Hi. My Name is

James Gheen

Welcome to the Bigger Investing website. I’m here to help you find the resources, motivation, and guidance for all entrepreneurial, investing, business, career endeavors, and more, so that you can invest in what’s most important. Your mind!

My focus is to equip you with expert sources, books, guides, articles, and more to help you achieve your personal goals.

Want to learn more? Take a look.

getabstract ad


Read in Graphics

Rich Dad Summit Ad

Best Books on Technology Industry

Best Books on Technology Industry

echnology in our society is something that helps us in many ways. It has changed the way we work, communicate, do business, and even how we learn. This blog post will provide you with a list of some great books on the technology industry to help...

What Businesses Use Telemarketing?

What Businesses Use Telemarketing?

elemarketing is a marketing technique that has been in use since the 1930s. It was developed to help businesses and individuals reach out to customers and potential clients by phone. Businesses of all sizes can benefit from telemarketing, but...

How Do I Start a Telemarketing Business?

How Do I Start a Telemarketing Business?

fter you have thought about the potential of a telemarketing business and decided it is for you, there are many steps to take before launching your company. First, find an office space that will suit your needs and then start looking for...

Best Books on Telemarketing

Best Books on Telemarketing

he most important part of a telemarketing campaign is the initial contact. This is where you make your pitch, and to do this effectively, you need to know what script to use. A good book on telemarketing will guide you through every step of the...

What are the Seven Rules of Negotiation?

What are the Seven Rules of Negotiation?

egotiation is a crucial skill to have in any business. It can be used not only with clients but also internally to get the best terms for your company and employees. While there are many different ways to negotiate, some of the most important...

What are Good Negotiation Skills?

What are Good Negotiation Skills?

he ability to negotiate is one of the most essential skills that a person can have. Negotiation is not only important in business, but it's also an important skill in life. The way you negotiate will determine your future success and happiness. A...

What is the Key to Successful Negotiation?

What is the Key to Successful Negotiation?

here are certain things you should never do in a negotiation. When I was just starting out, these were some of the most difficult lessons for me to learn. If you want to be successful at negotiating, there are three basic principles that will help...

How Do You Counter Offer a Salary?

How Do You Counter Offer a Salary?

t can be really difficult to counter offer a salary. When it comes down to it, you want the job and they want you. So how do you turn this situation into an advantageous one? The first thing is to know what your worth is. It may seem like a...

How Do You Start a Negotiation?

How Do You Start a Negotiation?

here are many ways to start a negotiation, but you need to keep in mind that the person on the other side of the table is just as nervous and scared about it as you are. You can make them feel more comfortable by starting with an ice breaker...

What Makes a Good Sales Negotiator?

What Makes a Good Sales Negotiator?

f you're in the market for a good sales negotiator, it's important to know what makes somebody successful at this job. First of all, they have to be able to negotiate well and get their clients the best deal possible. They also need to understand...

What is a Lettings Negotiator’s Salary?

What is a Lettings Negotiator’s Salary?

hat is a lettings negotiator's salary? This question should be on the mind of any prospective rental tenant. The negotiation process can be confusing, and knowing what to expect can help make it less stressful. The first thing to consider is that...

How Do You Deal with a Hard Negotiator?

How Do You Deal with a Hard Negotiator?

f you want to successfully negotiate a deal, it's important that you know how to handle someone who is hard-headed. These people are difficult and will not budge on their prices or demands. In this blog post, we'll discuss strategies for dealing...

What is the Most Important Attribute of a Negotiator?

What is the Most Important Attribute of a Negotiator?

negotiator is someone who helps two parties reach an agreement. What are the most important skills needed for this job? The answer to that question depends on what type of negotiation you're doing. In a business negotiation, it's important to be...

What Are the Characteristics of a Good Negotiator?

What Are the Characteristics of a Good Negotiator?

good negotiator is someone who has the ability to manage their emotions and think strategically. They are also able to communicate well with others, which can lead to building stronger relationships that could be beneficial in future negotiations....

What Country Has the Lowest Capital Gains Tax?

What Country Has the Lowest Capital Gains Tax?

he United States has one of the highest capital gains taxes in the world. It's a whopping 39% on long-term capital gains and 20% on short-term capital gains. If you're looking for a country with lower tax rates, look no further than Estonia. The...

Are There Any Tax Shelters Left?

Are There Any Tax Shelters Left?

here are many different tax shelters, and some of them are more popular than others. One of the most popular is a retirement account such as an IRA or 401k, but there are other options out there. In this blog post, we will explore these...

How Do Billionaires Avoid Taxes?

How Do Billionaires Avoid Taxes?

illionaires have a lot of money and they don't want to pay taxes on it. That seems pretty simple, right? In reality, their tax avoidance is more complex than you might expect. We're going to take a look at the different strategies that...

How Do Tax Havens Make Money?

How Do Tax Havens Make Money?

ax havens are a hot topic these days. They make money by helping businesses, wealthy individuals, and other investors keep their money away from the taxman. This is done in a variety of ways including bank secrecy laws that limit the amount of...

What is Called a Tax Haven?

What is Called a Tax Haven?

tax haven is a country or territory that offers favorable tax rates to foreign individuals, corporations, and other business entities. Tax havens can be either onshore or offshore and are typically characterized by strict banking secrecy laws in...

What is the Benefit of Being a Tax Haven?

What is the Benefit of Being a Tax Haven?

here are many benefits of being a tax haven, which is why so many people are drawn to this type of business. One of the main reasons that businesses choose to move their headquarters offshore is for the purpose of escaping high taxes and...

Is Switzerland a Tax Haven?

Is Switzerland a Tax Haven?

Switzerland is a small, landlocked country located in the Alps. It has been called a tax haven because it does not impose any taxes on personal income or capital gains - but is it really? Switzerland has one of the highest rates of taxation in...

How Can I Live Tax-Free?

How Can I Live Tax-Free?

any people are asking themselves this question. The answer is to move to a state that doesn't have any income taxes or sales tax, and then you will be able to live without having your hard-earned money go towards the government. It's not as...

Where Do the Rich Hide Their Money?

Where Do the Rich Hide Their Money?

he rich have a lot of money, so it is no surprise that they are always looking for ways to protect their assets. However, the question remains: where do they hide their cash? It can be hard to find out what people with a lot of money are doing...

Which Country Has No Tax?

Which Country Has No Tax?

axes are a big deal. In some countries, they cover up to 50% of the GDP. Some people believe that it would be better if there was no tax at all because that means each citizen's earnings will grow faster and more evenly. But which country has no...

Is Dubai a Tax Haven?

Is Dubai a Tax Haven?

he United Arab Emirates is a popular destination for ex-pats and internationals alike. The country has developed rapidly in the last 20 years, becoming one of the wealthiest countries in the world. But there are many who question whether Dubai is...

Are Tax Havens Good or Bad?

Are Tax Havens Good or Bad?

here are many arguments for and against the use of tax havens such as Switzerland, Luxembourg, or Barbados. Proponents argue that they are essential to free trade by protecting investments from taxation in other countries. Opponents claim it is a...

How Does a Tax Havens Work?

How Does a Tax Havens Work?

tax haven is a country with nominal taxes that have low or zero taxation on certain types of income. These countries typically offer favorable regulations for businesses and individuals to help them attract more capital. Tax havens can be used as...

Which Country is the Best Tax Haven?

Which Country is the Best Tax Haven?

he tax havens are a legal way of hiding money from the IRS. They allow people to put their wealth in offshore accounts, which don't have to be reported on any taxes until they're withdrawn. The United States government has been trying for years to...

Are Tax Havens Legal?

Are Tax Havens Legal?

ax havens are a controversial topic. Some people believe that tax havens are illegal, while others think they can be legal. In this article, we will explore the legality of tax havens to help you make an educated decision about whether or not it...

Best Books on Tax Havens

Best Books on Tax Havens

he best books on Tax Havens is a list of some of the most popular and reputable books that can help you learn about how to reduce your taxes by taking advantage of countries with low or no taxation policies. Whether you want to find out about the...