Unless you have a few hundred thousand dollars in cash handy, getting approved for a mortgage is a critical part of purchasing your new home. The mortgage approval process can take anywhere from 30 days to several months, depending on the status of the market and your personal circumstances.
Read on to learn what to expect from the process and what you can do to speed it up.
1. Mortgage Prequalification Letter: 1 to 3 Days
Before you start house hunting, apply for a prequalification letter from a mortgage lender. This will give you a rough estimate of how much a lender could offer you in a mortgage.
Don’t wait on a prequalification letter just because you’re not sure which lender to go with yet. It’s not a contract between you and a lender, so you can get your prequalification letter from one lender and your mortgage from another.
Getting a prequalification letter takes one to three days, and it’s surprisingly simple. All you need to do is provide a lender your best guess on your income, credit history, assets, debt, and down payment. The more accurate your response, the more accurate your prequalification will be, but most lenders won’t require any documentation at this phase.
However, when you’re shopping for a home, it’s important to know where you stand financially. Look at your credit reports, bank statements, outstanding debts, and credit scores. If you don’t know what your credit profile looks like, check Credit.com’s free credit report.
2. Mortgage Preapproval: 3 Days to Several Months
While a prequalification letter is handy, you’ll need preapproval for a mortgage when you’re serious about buying a home. Most home sellers will require you to have preapproval before considering your offer. Preapproval can also speed up your final mortgage approval, so if you want to get into a home quickly, don’t wait on this step.
A wide range of complicating factors means that preapproval for a mortgage could take as short as three days to as long as several months. Personal issues like a low credit score, previous short sales, previous foreclosures, and outstanding debt with the Internal Revenue Service can elongate the process, so be up-front with your lender about these potential problems.
To speed up the process, prepare your important financial documentation to submit to your lender. Your lender can tell you exactly what they require, but the following documents are common:
- Driver’s license
- Social Security card
- Most recent 2 months of bank statements
- Most recent 30 days of pay stubs
- Most recent 2 years of W-2s
- Most recent 2 years of federal tax returns
Along with these documents, your lender will also pull a credit report. All of this allows them to give you a very clear picture of exactly the type of mortgage they can provide. This will be documented in a preapproval letter, which is valid for about 60 to 90 days.
3. Mortgage Final Approval: Up to Two and a Half Weeks
Once you make an offer on a home and it’s accepted, it’s finally time to start on the final approval for your mortgage. Because you already provided your lender with your financial information, this part of the process is much less involved.
Before giving final approval, the lender will conduct an appraisal on the house, which verifies the home’s market value. House appraisals protect lenders from offering mortgages that are too exorbitant for the house’s worth.
The tricky part of an appraisal is scheduling a licensed appraiser to look at the house. It’s reasonable to assume the appraiser will already be booked out for the next two weeks, but once the house is appraised, the final mortgage approval can be processed within two days. So in total, it can take about two and a half weeks for final approval on a mortgage.
A Loan Officer’s Take
Three days is the fastest loan officer Scott Sheldon has ever seen someone get approved for a mortgage.
“He had every single iota of possible documentation you could imagine up front,” says Sheldon, who’s a senior loan officer in Santa Rosa, California. That three-day turnaround was unusual, but so was the time it took roughly two months to get mortgage approval.
“If the borrower was just a little bit more transparent up front, we probably wouldn’t have had that,” Sheldon says. “Many times, the documentation and supply opens up more questions.”
Sheldon says consumers often expect preapproval in a day, but that’s not enough time to thoroughly complete the process, especially if important documentation hasn’t been provided.
“My best advice to buyers is let your lender preapprove you—give them at least 72 hours to really preapprove you with all your financial documents, including a credit report,” Sheldon says. “It’s only as good as the information we put in there.”
You don’t want to miss out on your dream home because you were waiting on mortgage preapproval. If you’re about to start house hunting, prepare now by getting your finances organized and your documentation ready to send to your lender when the time comes.