Timing is everything when you’re purchasing a new home, particularly if you’re selling a home at the same time. You need to get pre-approved for a mortgage and you need to shop around for rates, but when to start the process is always a big question. How long does it take to get a loan? Mortgage software company Ellie Mae states that it takes an average of 45 days to close a home purchase mortgage. Though everyone’s experience is different, there are a basic set of steps that everyone must go through, and the timing is usually very similar.
Should I Comparison Shop for the Best Rates?
Even if you’ve already found the home of your dreams and the seller is waiting for your pre-approval letter, don’t get caught in the trap of jumping at the first mortgage loan offer. Different lenders offer different types of loans with different terms and packages and at different rates. Having a good understanding of what’s available to you will help you to save thousands on your loan.
Before you start your search, you should know your credit score and be prepared with proof-of-income documents to speed the process along. Start by making an appointment with the mortgage loan officer at your local credit union or bank. He can give you an estimate of what you can expect to see in terms of interest rates, closing costs and terms. Continue shopping in your local area and online, using that first estimate as your benchmark.
This part of the process should take no longer than 14 days, or you risk a ding to your credit score. The Fair Isaac Corporation (FICO) lets buyers rate-shop without the credit checks dinging your score as long as you don’t exceed a 14-day window.
How Long Does It Take to Get a Pre-Qualification Letter?
As you shop for a home, you’ll find that many sellers won’t even talk to you until you have a pre-qualification letter in hand.
Fortunately, this is the easiest part of the process. Ask any of the mortgage lenders you spoke to while rate shopping to give you a pre-qualification letter, which simply gives a rough estimate of the size of the loan you qualify for. Expect this to take from one to three days, as lenders generally go by the information you give them verbally rather than fact-checking credit, employment and income.
Keep in mind that you are not obligated to take out your mortgage from the same financial institution that gives you your pre-qualification lender. In fact, you can continue to rate-shop even after handing this letter over to the home’s seller.
How Long Does It Take to Get Pre-Approved?
The next step is for you to choose a lender and go through the pre-approval process. This is the part of the process where your lender will verify everything you’ve told self-reported. The lender will pull your credit report, and you will be required to supply the financial institution with copies of your Social Security card, documents that prove your income, assets and employment, bank records and documentation regarding any current debts in your name.
If you work full-time, have a solid credit and payment history and the records to verify your assets, this could take one to two weeks. If you’re on a visa, have complicated debts to deal with or are self-employed, your lender may require additional documentation, and this could extend the timing by weeks or even months.
One of the things to come out of this process is for you and your lender to agree on the intricate details of your mortgage program. This will include the type of mortgage, mortgage term, whether there are any points to be paid and other information. The lender will provide you with a pre-approval or loan commitment letter, as well as a detailed estimate of how much it’s going to cost you to close on your home.
How Long Does It Take to Get the Final Approval?
Once you’ve gone through all of the other steps, all you need to do is go through the final loan approval, which can take anywhere from three days to two weeks or more, depending on your financial lending institution. Depending on how long everything else has taken, you may need to resend documentation as some documents, such as your credit history, may have expired.
Your lender will go ahead and order an appraisal of the home you’re about to purchase, and this is often the pivotal point in determining how long it will be before you’re ready to close. It could take as long as two weeks to get a licensed appraiser ready to appraise your property, and the timing also needs to work for the seller as well. Once the appraisal is completed, however, your lender should have the results in just one to two days. If the appraiser finds things that must be fixed prior to purchase, such as missing CO detectors, you’ll need to work with your seller and lender on the timing and determination of who is going to pay for the repairs.
Once you provide a copy of the pruchase and sale agreement to your lender, there’s a lot of processing to be completed on behalf on your underwriter, and it’s not unusual during this time that you’re asked to provide new or additional documentation. Once you get your Closing Disclosure, which has replaced the old HUD-1 documents, you can celebrate. After the legally mandated three-day waiting period, you’re almost ready to purchase your home.
All that’s left is for all parties to sign the closing documents and return them to the lender, and the lender will then begin to prepare the closing documents. You’ll need to sign all of the escrow paperwork, which usually takes place a day or two before the closing, and then the lender will do a final document review. Then there’s the re-verification, funding, recording and finally the closing.
2 Point Highlight
Mortgage software company Ellie Mae states that it takes an average of 45 days to close a home purchase mortgage.
Before you start your search, you should know your credit score and be prepared with proof-of-income documents to speed the process along.
