The Mortgage Underwriting Approval Process

What to Expect and How Long It Takes

Image shows an interracial, queer couple looking elated as a mortgage lender tells them that they're approved for a mortgage. On the computer screen between them it reads: "Mortgage lender: approved!"

The Balance / Ellen Lindner

The mortgage underwriting process isn't something most people enjoy. It often feels like a long trip to the dentist. You gather the documentation required to get a mortgage. You hand this info over to your loan officer. The underwriters then review your files for completeness and accuracy.

You hope you covered everything. But, almost everyone messes something up. Maybe they forget to check some box. Or, they omit a statement. They might even just miss a signature. Don't worry. Your lender will request any missing documents or signatures and ask you to clear up issues as needed.

It can be a headache. But, it helps if you know what's coming and how to be ready for it. Here's what to expect out of the underwriting process.

What Is Mortgage Underwriting?

Underwriting is the process your lender goes through to figure our your risk level as a borrower. It involves a review of every aspect of your financial situation and history. They look at your income, bank accounts, investment assets, and your past reliability in paying back your loans. They do this by reviewing documents you submit, looking at your credit report, and following up with questions.

Your debt-to-income (DTI) ratio is an important factor in this review. Your DTI is the amount of your monthly debt payments compared to your gross monthly income. To know your DTI, use a mortgage calculator to estimate your monthly mortgage payment, then add to it your other monthly debt payments.

Getting Started With Underwriting

When you begin the underwriting process, you’ll probably be quizzed right off the bat about any large deposits in your checking or saving accounts or how much of your 401(k) plan is vested. This is especially true if you're planning on making a down payment of less than 20%. This is standard, so it's nothing to be concerned about. But, be quick with your answers and any additional info. It will get the process moving.

Your Choice of a Lender 

The next step in the underwriting process can vary a great deal depending on your loan officer and lender. The mortgage lender you choose, the type of loan you need, and the level of detail you've put into your documents will play a large part in determining your level of underwriting discomfort.

Your file will be passed on to a corporate mortgage processor in a central location that is often nowhere near you, at least if you are with a large bank or lender. These processors may be overworked and underpaid, so expect a longer time frame. Lenders try to maximize a number of loan files that everyone has to process and underwrite. It's a quantity-over-quality approach.

Smaller lenders and independent mortgage brokers usually staff in-house teams. This results in more efficient operations when everyone is under one roof. 

Even so, there are many good reasons to use a big bank. The giants can afford to take more chances than the little guy, and that's great if you find yourself in a gray zone for approval. They also often provide a wider variety of niche mortgage products for things such as renovation. But you'll have to give up a little something in the way of efficiency in exchange. 

The Effect of Turn Time

All mortgage lenders have a turn time. This is the time from submission for underwriter review to the final lender's decision. The turn time can be affected by a number of factors big and small. Internal policy on how many loan operations the staff carries at one time is often the biggest factor. But, things as simple as the weather—think Rochester, New York, in the winter—can throw off lender turn times quickly.

Ask your loan officer what they expect your turn time will be and consider that factor in your choice of a lender. Keep in mind that purchase turn times should always be less than refinance turn times. Homebuyers have hard deadlines they must meet so they get first priority in the underwriting queue.

Normally, your purchase application should be underwritten (approved) within 72 hours of underwriting submission and within one week after you provide your fully completed documentation to your loan officer. This can take as long as a month, though, depending.

Approved, Denied, or Suspended 

The underwriter will issue one of three decisions: approved, suspended, or denied.

If it's approved, underwriting will assign conditions you'll have to meet for full approval. This might be clarification regarding a late payment or a large deposit. It could simply be a missed signature here or there. 

If it's suspended, which is not completely unusual, you will probably need to clarify something.

These delays are often employment- or income-related. But sometimes, an asset verification question can also lead to a suspension. In this case, you’ll get two conditions: one to clear the suspension and the standard conditions needed for full approval.

Finally, if you're denied, you'll want to find out exactly why. Not all loans that start as denials end up that way. Many times a denial just requires you to rethink your loan product or your down payment. You might have to clear up a mistake in your application or on your credit report.

Approved With Conditions

The status of most loan applications is "approved with conditions." In this case, the underwriter simply wants clarification and additional docs. This is mostly to protect their employer. They want the closed loan to be as sound and risk-free as possible.

Often, the added items aren't to convince the underwriter, but rather to make sure the mortgage meets all the standards required by potential investors who might end up buying the closed loan. 

Your Role in All This 

Your job during the time your loan is in underwriting is to move quickly on requests and questions. No matter how silly you think the request might be, you need to jump through each hoop as quickly as possible.

Do not take it personally. This is just what underwriting does. Just handle the last few items and submit them so that you can hear the three best words in real estate: "Clear to close!"

Once you hear those words, there will be only a few more hoops to jump through. Cut your down payment check, sign on the dotted line, and get ready to move into your new home.