How Long Does It Take to Get Approved for a Mortgage?

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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 scoreprevious 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.

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3 Things That Will Sabotage Your Plans to Buy a House

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No one wants money to stand in the way when their heart is set on owning a home. But all too often borrowers pull last-minute moves that put their financing in jeopardy.

“The events that can endanger the transaction are the kinds that happen at the last minute,” according to Joe Parsons, senior loan officer with PFS Funding in Dublin, California, “for example, an unidentified or unsourced deposit made two days before escrow that we cannot source.”

We asked Parsons to share some common mistakes that can sabotage your mortgage approval process.

1. Changing Jobs 

“If I suddenly, at the last minute, change jobs and I don’t document it — [especially if I decide to do it between the time the loan is approved and close of escrow] — that could kill the deal,” Parsons said. That’s because lenders perform a verbal verification of employment within 24 hours of funding a loan. “We’ve had cases where the borrower decided to retire,” Parsons said, laughing. “Now I tell people not to quit their job before we finish the loan.”

2. Acquiring New, Undisclosed Debt

If your debt-to-income ratio is high and you go out and buy a new car, that could hamper the loan, Parsons said. (Your debt-to-income ratio represents the total amount of monthly debt payments, including the house payment, divided into monthly income.) Lenders perform a pre-closing credit check, known as a credit refresh, immediately before funding the loan to make sure the borrower hasn’t overextended themselves at the last minute. “They are looking to see if there’s any new debt that hasn’t been disclosed,” Parsons said.

If you decide to take on new debt before your loan closes, you’ll need to provide a letter of explanation to the lender. Hard inquiries will also appear on the credit refresh, like any request for a new line of credit.

3. Moving Money Around 

If you’re going to make a down payment of, say, $50,000 to buy a house, every dime must be documented and sourced, explained Parsons, even if it was a transfer, payroll deposit or tax refund. If the money was transferred from another account, say from savings to checking, then the lender would need to see two months’ worth of bank statements from the source. “Large deposits must be explained and documented,” Parsons said, lest the lender think the money came from an unacceptable source like a cash advance or money laundering.

Before You Apply

As with any new line of credit, it’s important to know where your credit stands long before you apply for a mortgage, as this will determine your eligibility for various rates. (You can view two of your credit scores, updated each month, for free on Credit.com.) You can learn more about why it’s important to check your credit before buying a home here.

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Local Bank Attracts First-Time Homebuyers With a Simple Perk: 1% Student Loans

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For young people looking to buy their first homes, there’s a big obstacle: student loan debt. It’s not holding back everyone, but debt obligations have a huge impact on the mortgage approval process, not to mention the ability to save for a down payment and other homebuying costs.

One bank decided it would shake up how student loans affect someone’s ability to get a home. Gate City Bank in North Dakota incentivizes student loan borrowers to buy their first homes by offering education loan refinancing with a fixed 1% APR, if they finance their home through the bank. The Forum in Fargo, N.D., published a story about the program in early March, saying the bank has closed 25 of these loans so far.

It’s called the BetterLife Student Loan program, and borrowers with two- or four-year degrees can refinance up to $50,000 in student loan debt per household, as long as they’ve made 12 consecutive on-time payments on their student loans. The 1% APR loan has a 10-year repayment term, while many student loans have interest rates at about 5% or higher and repayment terms in excess of 20 years.

Of course, if you don’t live in North Dakota or western Minnesota, it seems unlikely you’ll finance a home with Gate City Bank. It’s also a small and new program (it started in November, and in addition to those 25 loans, about 25 are in progress, The Forum reported in early March), so it’s too early to analyze it as a potential model for indebted aspiring homeowners.

Still, the program touches on an important issue: People with student loan debt who also want to buy homes often need to find a way outside standard repayment procedures to make their education debt less of a financial liability. Student loan refinancing is a growing industry where borrowers with good credit can get lower interest rates on their loans and sometimes get rid of them faster, though it’s not right for everyone. Refinancing federal loans with a private loan means you can lose access to programs like student loan forgiveness or other federal benefits.

In the end, whether you’re able to refinance your loans or not, having education debt (or any other outstanding debt obligations) will make getting a mortgage a little tougher. One way to improve your chances of buying a home while paying off student loan debt is to focus on improving your credit scores, since they’re a crucial factor in mortgage approval. Making student loan payments on time and minimizing your debt use can help you build a solid credit foundation. You can see how your student loans and other accounts affect your credit by getting a free summary of your credit report, updated monthly, on Credit.com.

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