Key takeaways

• Mortgage underwriting is a step-by-step process that usually takes one to two weeks, depending on your lender, loan type and how quickly you provide documents.
• Delays are common if paperwork is missing or finances change, so staying organized and responsive helps keep the process moving.
• After underwriting approval, buyers review closing disclosures, sign documents and pay closing costs to complete their home purchase.

Underwriting is the process that a lender uses to determine whether to give you a mortgage for a home. There are multiple steps lenders typically perform. Understanding how long they take can help you set realistic expectations when planning the move into your new home.

Here's what you need to know.

Underwriting usually takes between 30 and 45 days, according to AmeriSave, a lender in Sandy Springs, Georgia. Breaking each step into days gives you a simple metric to understand the process.

This is the step where you submit your mortgage application and supporting financial documentation. A lender will typically want to see your previous years' W-2 tax forms, your most recent savings and checking account statements from your bank, records of investment accounts, information about debts, including credit cards and outstanding loans, and any other information on your finances. You will also authorize the lender to access your credit reports.

The lender reviews your information and determines whether you meet their initial loan qualifications. This step can take between three and seven days.

At the end, a lender will issue you an approval letter stating how much they are willing to loan. This step can be completed before you actually start hunting for homes and is called a pre-approval letter. Getting pre-approved for a mortgage helps you make offers more quickly and gives sellers more confidence that you can afford the home.

A lender will order an appraisal of the home you're buying to ensure it is worth the amount they will loan. It also helps the lender calculate the home's value relative to the mortgage. This information will ensure the borrower has sufficient funds for a down payment.

If the appraisal is lower than the purchase price, the lender may not approve the mortgage. The buyer may need to negotiate a price drop or cash for the down payment.

A professional appraiser will visit the property and physically inspect the interior and exterior. They will also research recent sales of similar homes in the area. The appraiser will draft a report containing their estimate of the home's market value, based on their findings.

Related article:

• How appraisals help buyers and lenders avoid costly mistakes

The lender will use a processing team to verify your financial documents and employment records to further assess your ability to qualify for a mortgage. The processing team will ensure all documents are gathered, organized, and ready for review. During this time, lenders may contact you multiple times to ask for additional documentation.

An underwriter will conduct the formal review of your application and financial documents. They will analyze documents such as your tax returns, W-2s, bank statements, retirement savings, pay stubs, investment account statements, and any other relevant documents.

The underwriter will keep a keen eye out for indicators of financial responsibility/problems, including:

• Defaulting on a mortgage
• Making late payments on debt
• Credit score
• Credit report
• Collections that have been initiated against you

Underwriters will also verify that you can make the monthly mortgage payments and that you have cash reserves to cover payments if you lose your income. They will calculate the debt-to-income ratio by dividing your monthly debt payments by your gross monthly income. Most lenders want to see a DTI below 43%.

At this stage, the lender may give you an outright mortgage approval. They may also give you a conditional approval, meaning you have to meet conditions before you get the loan.

Some common conditions are updating financial documents as you get to closing and explaining any large deposits or withdrawals from your accounts. The faster a borrower meets the conditions, the faster the loan receives final approval.

Related articles:

• What is a credit score?
• What is debt-to-income ratio?
• What is closing?
  

If all conditions are satisfied, the loan moves to closing, the formal approval that gets you the money for your new home.

Applicants typically receive a form called a closing disclosure that summarizes the details of the loan. This will include the amount borrowed, the interest rate, estimated monthly payment, including principal, interest, taxes, and insurance, categorized closing costs, and how much cash you need to bring to closing.

You should receive the disclosure at least three days before closing, giving you time to review it for any errors or areas that you want your lender to explain.

In this step, you will conduct a final walk-through of the property. You'll verify that it is in the condition you expected. You will also prepare a cashier's check or wire transfer for the down payment and closing costs, review the disclosure again, and prepare any questions you will have at closing.

At closing, you'll meet with a real estate attorney and your agent, who will explain the terms of the final loan documents you'll need to sign to complete the transaction. The seller and their agent may also be present.

The closing takes one to two hours, during which you will sign documents, including the mortgage or deed that transfers the property to you. You will also sign a promissory note, which commits you to paying the mortgage, and a closing disclosure form confirming the final loan terms. Once everything is signed, you'll receive keys to the home. The deed will be recorded at the county land office, which can take up to a few days.

Homebuyers can take several steps to speed up the mortgage approval process.

You should be prepared to provide two years of tax returns, two months of bank statements, 30 days of pay stubs, your W-2 tax forms, your official identification, such as a driver’s license, and insurance quotes.

Lenders look for stable financial conditions. This means:

• No new credit cards
• No new car purchases
• No change in employment
• No large deposits
• No moving money between accounts

A competent loan officer can help an applicant speed up the process. They can communicate directly with the underwriter to ensure your file is seen and not lost in the queue.

AmeriSave recommends finding a lender that uses automated underwriting systems, digital document processing, and a staff member responsible for processing applications.

As you seek a good lender, ask candidates how much time it typically takes them to process a loan, AmeriSave said. Also, read reviews on how responsive and communicative they are, ask about their technological capabilities and ask about their staffing levels.

Applicants should avoid making several common errors, according to Mutual of Omaha Mortgage in San Diego, California.

• Failing to check credit report: Credit bureaus can make errors, such as neglecting to update changes in your credit utilization or that you've closed an unused credit card.
• Saving too little for a down payment: Lenders typically expect you to set aside 20% of the purchase price. There are government-backed loan programs that require less, such as a 3.5% down payment for using the Federal Housing Administration loan program.
• Spending outside your realistic budget for a home: Make sure you accurately calculate how much you spend each month and how much your mortgage will cost (breaking down for interest, principal, taxes, insurance and homeowners association fees.)
• Failing to provide accurate information or missing deadlines to submit documents: This can delay approval of your loan.
• Changing your financial status during the mortgage application period: Avoid making major purchases or taking on new debt, as it will affect your credit score and overall financial health.
• Failing to work with a mortgage professional: An experienced real estate mortgage officer can guide you through the steps to secure a loan.
• Failing to shop lenders for their best mortgage interest rates: A mortgage is like a commodity — you don't want to pay more than you have to for the service.

Most lenders offer online portals or regular updates so you can monitor your loan status. Ask your lender about their communication process.

If the underwriter finds an issue, you may need to provide more information or fix the problem before your loan can be approved. Your lender will guide you through any steps needed.

If the appraised value is less than what you agreed to pay, the lender may not approve the full mortgage amount. At that point, you may need to negotiate a lower price with the seller, increase your down payment to cover the difference, or, in some cases, walk away from the deal. Buyers should be prepared for this possibility and discuss options with their loan officer.

More on this topic: 

• Assess your financial readiness to buy a home 
• What you need to know about financing your dream home: an FAQ for buyers
• How to finance a home in 8 steps
• Buying a home in 10 steps
• How to get a mortgage: A step-by-step guide