How Long Does the Underwriting Process Take?

If you’re planning on financing a home through a mortgage, you’ll have to go through the underwriting process. The underwriting process helps mortgage lenders and loan officers review your credit and financial history before approving you for financing. However, for mortgages, the length of the process varies depending on multiple factors. In this guide, we explore the underwriting process and give you an estimate of how long it will last.

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What Is Underwriting?

Underwriting is where you (the borrower) come face to face with the bank’s gatekeeper: the underwriter. The underwriter is the last major hurdle standing between you and closing the loan on your new home. Your lender’s underwriter decides if the mortgage application is a safe risk for the lender.

During the process of underwriting a lender verifies your credit history, income, assets and liabilities before approving you for a home loan. The underwriting process takes place after you’ve made the downpayment on your home, and it’s merely a way for lenders to determine the risk levels associated with giving you a loan.

Underwriters may investigate tax returns, Form W-2s, credit reports, bank statements, savings accounts and your debt-to-income ratio. They may also review the home’s appraisal and verify your income and employment.

Mortgage Underwriting Dos & Don’ts

When applying for a mortgage, underwriting is a critical step where lenders assess your financial stability and ability to repay the loan. Understanding the dos and don’ts during this process can improve your chances of approval and ensure a smooth journey to homeownership. Here are some essential guidelines:

What to Do

Maintain financial stability: Keep your finances consistent throughout the underwriting process. Ensure that your income sources remain stable and avoid changing jobs unless it’s necessary.
Organize your documentation: Prepare and submit all required documents promptly. This includes pay stubs, tax returns, bank statements, and any additional information requested by the lender.
Be transparent: Disclose all financial obligations and sources of income. Lenders will verify your details, so honesty and clarity can save time and prevent complications.
Monitor your credit: Check your credit report for inaccuracies and address them early. A clean credit history can significantly impact your approval and interest rates.
Respond quickly: Underwriters may request additional information or clarification. Responding promptly helps to keep the process on track.

What Not to Do

Avoid large financial changes: Refrain from making significant purchases, such as cars or furniture, that could impact your debt-to-income (DTI) ratio.
Don’t open or close credit accounts: Changes to your credit profile during underwriting can raise red flags. Avoid opening new lines of credit or closing existing ones until after your loan is finalized.
Refrain from co-signing loans: Co-signing for someone else’s loan increases your financial liabilities, which can jeopardize your mortgage approval.
Don’t make large deposits without documentation: Large, unexplained bank deposits can trigger concerns from underwriters. Keep records of gifts, bonuses, or any unusual deposits.
Don’t overlook communication: Ignoring requests or delays in providing information can lead to unnecessary setbacks. Stay proactive and in touch with your lender.

Possible Responses From Underwriters

The underwriter has the option to approve your application, deny it or say that a decision is pending. Typically, approval is a green light to schedule a closing. However, approval may come with conditions so those would have to be met before closing.

A denial can result from a low credit score, being too indebted or not being eligible for a particular loan type you are seeking. Once you know the reason for the decision you can take steps to address the issue.

A “decision pending” response from the underwriter typically indicates that additional documentation is needed.

How Long Does It Take?

Though the length of the process can vary depending on your particular situation, it can last for as little as two to three days. The process could last longer, though, because it may take multiple days or several weeks for a lender to review your financial records and documents and render a decision.

An underwriter’s process entails loan processing and approving or denying your application. If your application is approved, the underwriter will then finish the process by clearing contingencies and “closing” the mortgage.

Bottom Line

Underwriters are, in essence, the gatekeepers of home loans. They review your finances and ultimately determine whether to approve you for a mortgage. And even if you’re pre-approved by a lender, your application could still be denied by an underwriter. These professionals are crucial to the home lending process, so it’s best to make sure you’ve prepared all the necessary documents and records before you apply for a loan.

Home Buying Tips

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