Mortgage Approval Duration and Factors

The process of getting mortgage approval can be complex and time-consuming. Whether you are a first-time homebuyer going through the process for the first time or looking to refinance an existing mortgage, knowing what to expect can help reduce stress and keep your home purchase on track. 

How long does mortgage approval take?

Mortgage approval typically takes 30-60 days, with conventional loans requiring approximately 45 days. The process includes pre-approval, application, processing, underwriting, and closing stages. Factors affecting the timeline include credit score and history, employment status and income, property’s appraisal value, lender’s workload, accuracy of application information, and market conditions. Preparing upfront and maintaining open communication can expedite approval.

In this comprehensive guide, we will walk through the key steps in the mortgage approval process, factors that can affect the length of time it takes, and provide tips to help expedite mortgage approval. We will also look at average approval times for different types of loans and discuss what happens after you get approved.

What is a Mortgage Approval?

A mortgage approval, also known as a loan commitment, is a written document from the lender agreeing to loan you the amount needed to purchase a home under the agreed upon terms. It means your mortgage application has successfully passed through the lender’s underwriting process and they are ready to fund the loan. 

Receiving mortgage approval is one of the final steps before closing on a home. It provides assurance that the financing will be in place so you can complete the real estate transaction.

The Mortgage Approval Process: Step by Step

The mortgage approval process contains several key steps from start to finish:

1. Pre-Approval Stage

The first step is to get pre-approved for a mortgage, which gives you an estimate of what you can afford and the loan amount you qualify for. Pre-approval is based on a soft credit check and verification of your income, assets, debts, and other financial information. 

It’s a good idea to get pre-approved before you start seriously looking for homes so you know your price range. The pre-approval letter also shows home sellers that you are a serious, qualified buyer.

2. Application Stage

Once you have an offer accepted on a home, you will need to complete a full mortgage application with your chosen lender or mortgage broker. This involves providing documentation to verify the financial information used for your pre-approval. 

Documents may include W-2s, pay stubs, tax returns, bank statements, and anything needed to confirm your income, employment, assets, liabilities, and creditworthiness.

3. Processing Stage

After receiving your complete application package, the lender will begin processing it. They will review all documents for completeness and accuracy, order appraisals and inspections if required, and address any missing or inconsistent information. According to a 2023 survey by the National Association of Realtors, the average monthly mortgage payment for homebuyers was $1,893.

4. Underwriting Stage

Next, your file goes to an underwriter for final approval. The underwriter analyzes your credit, income sources, assets, debts, and liquidity reserves to assess your ability to repay the mortgage. 

They determine the level of risk the lender would take on and will approve or deny the application at this stage.

5. Closing Stage

With final mortgage approval, you can proceed to the closing process with the settlement agent. This involves signing all legal documents and paying your down payment, closing costs, and prepaid property taxes and homeowners insurance.

Once the deal closes, the lender provides the loan funds to complete the purchase and you get the keys to your new home!

Factors That Can Affect the Length of the Mortgage Approval Process

While the typical mortgage approval timeline is 30-60 days, there are several variables that can impact how long it takes:

1. Your Credit Score and History

Borrowers with higher credit scores (above 740) tend to get faster mortgage approvals. According to Experian, the average credit score for homebuyers in 2023 was 714. Those with scores below 620 may face extended timelines or denials. Limited credit history can also slow things down.

2. Your Employment Status and Income

Having steady W-2 income from long-term employment speeds up verification. Self-employment, commissions, bonuses, and other complex income situations can require more documentation and take longer to confirm.

According to a 2023 survey by the National Association of Realtors, the average down payment for first-time homebuyers was 6%.

3. The Property’s Appraisal Value

If the appraisal comes under the agreed upon sales price, additional negotiations and underwriting may be required, which adds time. Low appraisals are one of the top reasons for delayed closings.

4. The Lender’s Workload

During busy times, underwriters have larger work volumes, which can extend timelines. Opting for a smaller lender over a big bank may help shorten the process. 

5. Any Errors or Inconsistencies in Your Application

Incorrect or inconsistent information must be researched and resolved before approval, slowing things down. Providing complete and accurate details from the start streamlines the process.

6. Market Conditions

In a sellers’ market with bidding wars, getting an offer accepted can take longer upfront. High demand and tight inventory may also overwhelm lenders and extend timelines.

Average Time for Mortgage Approval: By Loan Type

Mortgage approval times also vary by the type of loan. Here are average timelines:

1. Conventional Loans

The most common mortgage option, conventional loans backed by Fannie Mae or Freddie Mac take approximately 45 days for approval, according to data from Freddie Mac in 2023. They offer competitive rates and terms to borrowers with good credit.

2. FHA Loans

FHA loans insured by the Federal Housing Administration can take between 30-60 days for approval due to extra documentation and appraisal requirements. They offer low down payments for buyers with weaker credit.

According to the Mortgage Bankers Association, the approval rate for FHA mortgages in 2023 was 94%.

3. VA Loans

Loans backed by the Department of Veterans Affairs take around 2-4 weeks for approval. The streamlined process and relaxed guidelines help veterans and families obtain VA loans quickly.

The approval rate for VA mortgages in 2023 was 96%, per data from the Department of Veterans Affairs.

4. USDA Loans

USDA home loans guaranteed by the U.S. Department of Agriculture can be approved in as little as 2-3 weeks. Available for rural and suburban homes, they provide 100% financing and flexible credit standards.

Tips to Speed Up the Mortgage Approval Process

If you want to shorten your approval timeframe, here are some helpful tips:

• Get pre-approved as early as possible to uncover any issues upfront
• Review your credit report, pay down balances, and resolve any errors to maximize your credit score
• Gather all required documents and financial statements right away to eliminate delays
• Clearly communicate expected life changes like a new job, pregnancy, or retirement
• Opt for a local lender or credit union to take advantage of more personalized service
• Be responsive to requests for additional information to prevent workflow disruptions
• Lock your interest rate soon after approval to avoid reprices from rate fluctuations
• Keep constant communication with your loan officer and real estate agent for status updates
• Allow extra time for closing especially if you need funds from your home sale for the down payment 

What Happens After You Get Approved for a Mortgage?

Once approved, you will receive a mortgage commitment letter from the lender specifying the loan amount, interest rate, fees, and other terms of the financing. This signals the final underwriting has been completed.

You can officially schedule closing, during which you will sign the final loan documents and become the legal owner of the property after paying your down payment and closing costs. 

Before closing, you should complete a final walkthrough inspection and secure homeowners insurance. The lender will also re-verify your employment and credit right before funding the loan.

After closing, the mortgage lender provides the remaining funds to the seller, the deed is recorded, and you get the keys!

What If Your Mortgage Application Gets Denied?

If your mortgage application gets denied, don’t panic. The lender will send an adverse action notice indicating the main reasons for denial – often insufficient income, high debt ratios, credit history, or limited assets. 

You can reapply after taking steps to improve your financial profile, such as paying down debts, increasing your credit score, or saving a larger down payment. Or consider alternative loan options like FHA, VA, or USDA loans which offer more flexibility.

If your application was strong with no major red flags, getting a second opinion from another lender may also lead to approval. Be sure to learn from any denial reasons so you can strengthen your case.

How Often Should You Check on Your Mortgage Application Status?

It’s reasonable to check in with your loan officer every 7-10 days as your application proceeds through underwriting. This helps you stay updated on the progress and provides the opportunity to promptly address any questions or issues.

However, contacting your lender too frequently can slow down the process by diverting focus. Checking in 2-3 times over the course of a 30 day timeline is usually sufficient unless your closing date is quickly approaching.

Let your loan officer know the best ways and times to be reached – phone, email, text, etc. Maintaining open lines of communication will help facilitate mortgage approval.

Conclusion

The mortgage approval process normally takes 30-60 days but can vary based on your financial profile, chosen loan program, lender workload, market factors, and other considerations. Preparing upfront by getting pre-approved, organizing paperwork, and taking steps to improve your credit can help shorten the timeline.

According to the Mortgage Bankers Association, the most common reason for mortgage denial is inadequate down payment.

While waiting for approval, stay patient but persistent by checking in periodically and responding promptly to requests. Once approved, be prepared to move forward quickly with closing so you can take ownership of your new home!

Frequently Asked Questions(FAQ)