Mortgage Loan Approval…What’s Involved?

Everyone has heard that mortgage financing is more difficult to obtain these days. What people may not be aware of, however, is the “why” behind the time it takes to get a loan approved and closed in the mortgage industry today.

First, you should talk with your Mortgage Consultant/Loan Officer (MC/LO) to handle the prequalification for your loan AND complete the formal loan application. Remember, prequalification and full loan applications are two different things.

Make sure to have with you all your required documentation of income, employment and assets. In some cases you will also need to provide information on credit such as explanations for any late payments, inquiries, etc.

Your MC/LO then needs to prepare your file to submit to their Processing Center. In most cases, this will take a few days, especially if they are waiting for you to get back to them with additional paperwork and documents.

Typically, if you fill out all your application paperwork, your loan is submitted within 3-5 days. There are 20 business days in the average month which means that you have left the processing and underwriting center on average 15 business days (two weeks) to:

• Review initial package

• Order the appraisal

• Underwrite the loan

• Review the underwriting conditions

• Review the appraisal

• Order and receive back any third party verifications, such as employment, rent etc.

• Review and prepare the closing package

As you can see this is a lot of information to have reviewed in two weeks and remember that, most likely, there are other loan applications like yours in process.

Recently JD Power and Associates put together a study which was quoted in Origination News:

Data shows the average time from application to approval has increased to 27.5 days in 2010 from 20 days in 2009.

And this is much worse than when compared with 2008, when the application to approval turnaround was 10.7 days.

So when you are looking to purchase or refinance, keep in mind that a more realistic time frame from your application date to your close date is 30 business days…not calendar days.