You’ve found a home and signed your real estate purchase contract. Now it’s time to get started on your home loan. Lucky for you, you’ve got a great lender who can guide you through the process. But, even the fastest lenders must stick to minimum timelines when originating a home loan. Many borrowers are unaware of these federally mandated waiting periods and they can add frustration and anxiety to what can be an already complex process.
Let’s explore some of the minimum timelines and typical timelines for each step in the mortgage process. Then, in our next article, we’ll offer some great tips to help you get through these timelines as effortlessly as possible.
Step 1: Initial Disclosures – Minimum: 0, Typical: 48 hours
Initial disclosures include a Truth-In-Lending statement (TIL) and a Good Faith Estimate (GFE). These documents outline the terms of the loan as well as the amounts required to obtain the loan. Disclosures typically take 1-2 days to complete. While there is no minimum requirement to complete them, you cannot close until 7 days after these initial disclosure documents are signed.
Step 2: Appraisal – Minimum: 0, Typical: 5 days
Once initial disclosures are signed, your appraisal will be ordered. Your appraisal is completed by a licensed appraiser. While in theory, this could be completed as quickly as the appraiser can finish it, appraisers typically take 5 days to complete and write a full residential appraisal. Some take as long as 2 weeks in busier markets.
Step 3: Underwriting – Minimum: 0, Typical: 48 hours
By now, your lender has gathered all the typical required documents to support your home loan request, issued initial disclosures, and ordered and received an appraisal on your home. Now it’s time for underwriting, a process that verifies all the information submitted to ensure proper guidelines are met. Underwriting, like appraisals, could be completed as quickly as is humanly possible, however underwriting is typically a 48-hour process at its fastest, and as long as 30-45 days in high-peak times.
Step 4: Underwriting Take 2 – Minimum: 0, Typical: 48 hours
One thing most people don’t know is that your file is almost never perfect and complete the first time around. Tightened lending standards has brought with it a greater need for supporting documentation. Since everyone’s situation is unique, your file will likely come out of underwriting with “conditions”, or additional requirements that must be met in order to be approved for your loan. In order to pass off these conditions, your file must go back through underwriting a second time.
Step 5: Final Disclosures – Minimum: 0 or 3 days, Typical: 0 or 3 days
Congratulations! By now you’ve been approved for your home loan. Now the same disclosures that were issued when you first started the process are issued again with finalized and accurate terms and amounts. These amounts will likely not vary much from the amounts shown in the initial disclosures, however, changes in market interest rates, title fees, and lender fees can cause slight variances. If your Annual Percentage Rate (APR) changes by more than 1/8 of one percent from the initial to the final disclosures, you must wait 3 days before you can close.
Step 6: Settlement and Closing – Minimum: 0, Typical: 48 hours
The last step in any home loan process is signing of all of the required documents. This signing cannot occur earlier than 7 days after the initial disclosures were signed (Step 1). If your final disclosures resulted in a change to your APR over 1/8 of one percent, you must wait an additional 3 days, at minimum. Additionally, it typically takes 48 hours from the time you receive your underwriting approval to complete and deliver these final documents to your local title company or attorney’s office.