What to expect from the drawing process
If you are applying for a home purchase or a refinancing loan, you have likely heard the term "underwriting".
Mortgage insurance is the process by which your lender verifies your eligibility for a home loan. The underwriter also ensures that your property meets credit standards.
Underwriters are the final decision-makers on whether or not your loan will be approved. They follow a fairly strict protocol with little wiggle room. However, delays can still occur at different stages of the process.
Here's what to expect when drawing up mortgages and what to do if your loan approval is taking longer than expected.
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How long does the underwriting take?
Mortgage lenders have different “turnaround times” – the time it takes from submitting your loan for underwriting to making a final decision.
The full mortgage loan process often takes anywhere from 30 to 45 days from underwriting to closing. However, turnaround times can be influenced by a number of different factors, such as:
Internal HR policies Loan application volume (how many mortgages a lender is processing at one time) The complexity of your credit profile (e.g. someone with problems in their credit history may take longer to approve than someone with an ultra-clean credit report).
Mortgage drawing can take a day or two or weeks, depending on these factors.
Under normal circumstances, initial drawing approval will be granted within 72 hours of submitting your full credit file.
In extreme scenarios, this process can take up to a month. However, it is unlikely to take that long unless you have an exceptionally complicated credit record.
When buying a mortgage, ask lenders how long it currently takes to complete a home purchase or refinance (depending on your loan type).
In addition to purchasing interest and closing costs, processing times should be one of the last factors in your final lender choice.
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What Is Involved In The Mortgage Insurance Process??
Whether you're buying or refinancing, the underwriting process is very similar.
1. Loan Approval
Underwriters take a close look at your financial situation. You will need to check the information you provided on your mortgage application against your records.
Most importantly, your underwriters:
Recognition – Your credit scores and credit history indicate your likelihood of repaying your mortgage loanIncome and Employment – Typically, lenders review your last 24 months of employment. Employment gaps may require a letter of explanation. You'll also need to provide documentation such as pay slips, W2s, and tax returns depending on how you are being paidDebt ratios – The lender reviews your monthly debt against your income to determine yours Debt-Income Ratio (DTI). This will help you verify that you can afford your future monthly mortgage payments. Different loan programs have different loan loss provisions for debt ratiosrating – The valuation determines the fair market value of your new house. This is an essential part of the drawing process. Lenders need to see that the home is worth at least as much as the contracted sales price; Otherwise, you may have to renegotiate the purchase price, down payment, or the entire loanMortgage Program – The underwriter will verify your eligibility for the type of loan you want (such as a conventional loan or an FHA loan). Various mortgage programs have different requirements
Assuming your finances are checked out and the home valued at or above purchase price, move on to the next step, which is often a "conditional approval".
2. Conditional approval
After the underwriter reviews your file, they usually give conditional approval.
Conditional approval is usually a good sign. This means that the underwriter expects your loan to be closed. However, you may have to meet at least one or more conditions before this can happen.
This usually involves providing additional information and documents.
Some subscription terms can be quite simple and straightforward.
For example, the underwriter may require a letter of explanation for derogatory information on your credit report. Previous bankruptcies, judgments or even late debt payments can warrant letters of explanation.
Sometimes a letter or two of explanations is enough to give final approval. These types of problems can be resolved quickly.
In other cases, the mortgage terms can be more complicated and take longer to complete.
For example, final approval may be delayed if your lender requires:
Documentation to Support Large Cash Deposits in Your Bank Account Additional Appraisal Details to Support Home Value Certain debts on your credit report may need to be paid back to qualify bank statements, which sometimes take 12 months to provide evidence of a particular payment being made if you are self-employed a year-to-date income statement may be required
In these cases, the underwriting schedule will depend on the complexity of the problem and how long it will take you and / or your financial institutions to provide these additional documents.
3. Final approval
Ideally, the underwriter will give final approval once the terms of your conditional approval are met. This means that you are "clearly closing".
If rejected, ask your lender why and what you can do to reverse the decision.
A mortgage can be rejected if the terms of the conditional approval are not met or if your financial information has changed since your pre-approval.
For example, if your credit score falls between your pre-approval and final underwriting, you may no longer be eligible for the loan terms or mortgage rate that you were originally offered.
In these situations, the borrower may need to reapply for another type of loan or withdraw and wait for circumstances to improve before applying again.
Isn't news good news?
Often times it can be important not to hear the words "Clear to Close" within the time frame you expect.
However, no message can just as easily mean that your lender has an unusually high volume of loan applications.
The best way to allay your concerns is to keep in touch with your loan officer.
Ask how often and in what form you should expect updates. For example, should you check your email? Will your lender communicate by text? Or is there an online portal or app that you can use to track the progress of your loan?
Consistent communication is key. Ideally, your lender will contact us immediately if there are any issues with the underwriting process. However, if you've waited longer than expected, take it upon yourself to find out what might be causing the delay.
Does Loan Refinance Underwriting Take Longer?
Currently, most lenders take longer to process refinance requests than home loans.
Home buyers have tough deadlines to meet, so they usually get first priority in the drawing queue.
Average turnaround time for purchases from underwriting to closing is approximately 30 days. Refinancing takes an average of 45 days.
However, be aware that closing times vary depending on the lender. The underwriting process can be much faster if a lender's underwriting team has a lot of bandwidth, or slower if it is overcrowded with loan applications.
When applying for loans, you can ask lenders about their current closing times to assess which loans can approve your home loan faster.
How to speed up underwriting process
In the mortgage world, underwriters are the porters between you and your home loan.
Since they are an essential part of the mortgage approval process, you want to be prepared to provide any required documentation that will be requested.
If you act quickly and provide documentation, you can limit underwriting delays.
Issues as simple as a missing signature can prolong underwriting and cause delays in closing. So be thorough when signing and reviewing your records.
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 you need anything to help move the process forward.
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