How long does the subscription take? Is the lack of news good news?
What to expect from the subscription process
If you’re applying for a home loan or refinance, you’ve probably heard the term “underwriting” before.
Mortgage underwriting is the process by which your lender verifies your eligibility for a home loan. The underwriter also ensures that your property meets loan standards.
Underwriters are the final decision-makers as to whether or not to approve your loan. They follow a fairly strict protocol with little leeway. But delays can still occur at different stages of the process.
Here’s what to expect when taking out a mortgage and what to do if your loan approval takes longer than expected.
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How long does the subscription last?
Mortgage lenders have different “lead times” – that is, the time it takes between submitting your loan for underwriting review and making the final decision.
The entire mortgage process often takes 30 to 45 days from subscription to closing. But turnaround times can be affected by a number of different factors, such as:
Internal staffing policies
Loan application volume (how many mortgages a lender processes at the same time)
The complexity of your loan profile (for example, someone with issues with their credit history may take longer to approve than someone with a super-clean credit history)
Depending on these factors, purchasing a mortgage can take a day or two, or even weeks.
Under normal circumstances, initial underwriting approval takes place within 72 hours of submitting your complete loan file.
In extreme scenarios, this process could take up to a month. However, it is unlikely to take that long, unless you have an exceptionally complicated loan file.
When shopping for a mortgage, ask lenders how long it currently takes them to complete a home purchase or refinance (depending on your loan type).
In addition to purchase interest rates and closing costs, turnaround times should be one of the final factors in your ultimate choice of a lender.
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What is the mortgage underwriting process??
Whether you are buying or refinancing, the underwriting process is very similar.
1. Credit approval
Insurers carefully examine your financial situation. They should verify the information you provided on your mortgage application by comparing it to your documents.
Most importantly, underwriters will review your:
Credit – Your credit scores and credit history are indicative of your likelihood of paying off your mortgage.
Income and employment – Typically, lenders will look at your last 24 months of employment. Employment gaps may require a letter of explanation. You will also need to provide documents such as pay stubs, W2 forms, and tax returns, depending on how you are paid.
Debt ratios – The lender will compare your monthly debts to your income to determine your debt to income ratio (DTI). This is to verify that you can pay your future monthly mortgage payments. Different loan programs have different allowances for debt ratios
Evaluation – The appraisal will determine the fair market value of your new home. This is an essential part of the subscription process. Lenders should see that the house is worth at least as much as the contracted sale price; otherwise, you may need to renegotiate the purchase price, down payment, or the entire loan
Mortgage program – The underwriter will verify your eligibility for the type of loan you want (eg a conventional loan or an FHA loan). Different mortgage programs have different requirements
Provided that your finances are verified and the home is valued at or above the purchase price, you will proceed to the next step, which is often “conditional approval”.
2. Conditional approval
Once the underwriter reviews your file, they will usually issue a conditional approval.
Getting conditional approval is usually a good sign. This means that the underwriter expects your loan to end. However, you may need to help meet at least one or more conditions before this happens.
This usually involves providing additional information and documents.
Some subscription conditions can be quite straightforward and straightforward.
For example, the underwriter may require a letter of explanation for derogatory information on your credit report. Past bankruptcies, judgments or even late payments of debts may warrant letters of explanation.
Sometimes one or two letters of explanation are enough to issue the final approval. These types of issues can be resolved quickly.
Other times, mortgage terms can be more complex and take longer.
For example, final approval could be delayed if your lender requests:
Documentation to support large cash deposits to your bank account
Additional appraiser details to support the home’s value
Some debts on your credit report may need to be repaid to be eligible
Bank statements, sometimes covering 12 months, may be required to prove a particular payment
If you are self-employed, an annual income statement may be necessary
In these cases, the subscription period depends on the complexity of the issue and the time required for you and / or your financial institutions to provide these additional documents.
3. Final approval
Ideally, once the conditions of your conditional approval are met, the underwriter will issue the final approval. This means that you are “allowed to close”.
If you are denied, ask your lender why and what you can do to reverse the decision.
A mortgage can be refused if the conditions of the conditional approval are not met or if your financial information has changed since you were pre-approved.
For example, if your credit score is between your pre-approval and final underwriting, you may no longer be eligible for the loan terms or mortgage rate that were originally offered to you.
In these situations, the borrower may need to reapply for another type of loan or opt out and wait for their situation to improve before reapplying.
Isn’t the absence of news good news?
Often times, not hearing the words “Clear to Close” within the time frame you expected can be a concern.
However, no news can quite as well mean that your lender is experiencing an unusually high volume of loan applications.
The best way to allay your worries is to stay in touch with your loan officer.
Ask how often you should expect to receive updates and in what form. For example, should you check your emails? Will your lender communicate by SMS? Or is there an online portal or application that you can visit to track the progress of your loan?
Consistent communication is the key. Ideally, your lender will contact you immediately if there are any issues in the underwriting process. But if you’ve waited longer than you expected, take it upon yourself to reach out and find out what might be causing the delay.
Does underwriting take longer to refinance loans?
Currently, most lenders take longer to process refinance applications than home loans.
Homebuyers have tight deadlines that they must meet, so they usually have first priority in the underwriting queue.
The average timeframe for purchases, from subscription to closing, is approximately 30 days. Refinances last an average of 45 days.
But keep in mind that closing times vary depending on the lender. The underwriting process could be much faster if a lender’s underwriting team has a lot of bandwidth, or slow at a breakneck pace if overwhelmed with loan applications.
When you apply for a loan, you can ask lenders for their current closing times to help you assess which ones will be able to approve your mortgage faster.
How to speed up subscription treat
In the mortgage world, underwriters are the gatekeepers between you and your mortgage.
Because they are an essential aspect of the mortgage approval process, you must be prepared to provide all the necessary documents requested.
Being responsive and providing documentation in a timely manner will help limit underwriting delays.
Problems as simple as a missed signature can lengthen the subscription and lead to closing delays. So be careful when signing and reviewing your documents.
And keep your lines of communication open. If the underwriting is taking longer than expected, contact your loan officer to see what is causing the delay and if anything is needed on your part to move the process forward.