Borrowers can do quite a bit of “pre-game” before submitting a loan application. First, there’s the thought of buying a house and getting a mortgage or they’re considering refinancing out of their current loan. They do a bit of research, maybe take a peek at prevailing rates and let the thought of buying settle in for a while. But then when it finally comes time to get serious, they complete an application and submit it to their loan officer. So far so good, but what happens once the application is submitted? Let’s look at a typical timeline from the initial application to the final funding so you’ll know what to expect as you get closer to your settlement date.
The Initial Call. Your first contact with your loan officer will most likely be general in nature regarding current rates, payments, closing costs and available loan options. Your loan officer will ask a series of questions about income, credit and current monthly credit obligations and then provide you with an approximate amount you can qualify for.
Initial Submission. Yet to get preapproved, you’ll need to submit your loan application along with supporting documentation. Your loan officer will tell you what all is needed but you can expect to provide copies of your most recent pay check stubs, your last two years of W2 forms and bank statements showing sufficient funds to close. If self-employed, be prepared to provide two years of federal income tax returns. Your loan officer will also pull a credit report.
The AUS Submission. Your loan officer will then submit an electronic version of your loan application to an automated underwriting system, or AUS. Within moments after submission, your “approval” will be issued along with a list of required documents needed before the loan can receive a full approval. You can expect your loan to be submitted to an AUS the same day or the next day.
The Gathering. Now the ball is back in your court. Your loan office will provide you with a list of anything else needed from you. You might be asked to provide an explanation letter regarding some aspect of your file. For instance, there might be a deposit in your bank account that can’t be matched up with your pay check. Depending upon how quick you can provide the items on the new list, this should take no more than a day or two. But the longer you take to respond, the less time the lender has to prepare your closing papers.
Ordering Out. At this stage, the lender orders various third party services. This is typically done by your loan processor. An appraisal will be ordered, title work and other necessary services and documents will be placed in queue. How soon these new documents arrive will also impact your loan timeline but on average you can expect about a week for most items, sooner for some. So far, you’re about one week into the process.
Underwriting Submission. Your loan was initially submitted to an AUS which provided the groundwork for your final approval but now the file is delivered to the underwriter. The underwriter is the individual who makes sure the loan being submitted meets all the guidelines for the selected loan program. Depending upon the current workload, you can expect your loan to be in underwriting for 2-3 days. It really doesn’t take an underwriter that long to make a decision on your loan it just might take that long for your loan to become next in line to be reviewed. At this stage, you can expect the underwriter to provide an initial approval. If there are any remaining items that need to be delivered, this is the time. At this stage, you’re about 10 days into the process.
Loan Papers Ordered. Once your loan has been fully approved, your closing papers are drawn and delivered to your settlement agent with a list of instructions for the agent to follow. At this stage, your loan is designated as “clear to close.” The settlement agent prepares an initial Loan Estimate that will list the charges you can expect to see at closing. This statement must be delivered to you at least one day before your closing. You should review the statement and understand the charges you’ll see. Depending upon the current workload, your papers should take 1-2 days to be delivered to the settlement agent.
Signing. This is when you show up at your closing to sign all necessary closing documents. You will notice that you’ll be signing some of the same forms you’ve previously signed but these documents may need a “wet signature” meaning a live signature and not a copy. The settlement agent makes sure you’ve signed where you’re supposed to sign and then return the signed documents to the mortgage company. The mortgage company will make sure the instructions have been followed to the letter and if so, the lender provides the settlement agent with a “funding number” which unlocks the funds needed for the mortgage. This is considered “final funding” and your loan is official. If you’re refinancing an existing mortgage, your loan can’t fund on the same day. Instead there is a three day right of rescission period that must be observed. At the end of this period, your loan is complete.
One final note, while the application to final funding can occur within a couple of weeks it depends upon the current workloads of all the various companies involved. On average, you can expect a loan to be fully approved in two to three weeks. Your loan officer can give you a timeline for your situation.