The time that it takes to close a mortgage loan varies with the type of mortgage, buyer/homeowner scenarios, and lender efficiency. A good rule of thumb, however, would be to presume that a typical mortgage will take approximately four to six months to close from application . The most common key ingredient in this recipe is for you to have a completed application as soon as possible. Understand that certain loans may need a slightly longer period to reach closure.
The key to estimating a date is the day. Just submitting a mortgage application (Form 1003) is inadequate. If an application is submitted by you, be certain it is accompanied with income verification — at least two recent pay stubs and the two decades’ W-2s or 1099s your lender requests. Often, they will need bank statements — up to six months — from the main financial institutions, evidence of deposit money, purchase arrangement, and a letter of justification (LOE) for any adverse entries on your credit report.
Any loan not given by or guaranteed by the U.S. government is a conventional mortgage. These mortgages typically take from a few weeks for an easy refinance loan for six months for a”deal without difficulties” loan. Your mortgage lender need only to order and analyze your own credit report, get a finished appraisal (without valuation problems) and verify your deposit funds to issue a company approval. This might require one or two weeks. When you accept the loan, the lender sends your document to a closing agent, which might be an lawyer, escrow or title company, to hunt the name and prepare closing documents, which include notes, actions and disclosures.
FHA (Federal Housing Administration) mortgages might take a little more time to close. Eight months was a solid rule of thumb. However, in recent years, FHA has streamlined the process and often closes loans as quickly as conventional mortgages. Formerly, the excess time resulted from the fact that FHA does not make loans insures the loan amount that your lender approves. Before tech advances, your lender needed to mail a completed application to FHA for approval and its analysis. Modern electronics enable much faster FHA approvals.
Much like FHA, the VA (Veterans Administration) does not make direct mortgages, but insures the loans out of other people. Time consuming and dull, VA mortgages are prepared for closure in six to seven months. Take note that with the usual income verification records, you will need to submit a Certificate of Eligibility, obtained from the VA, signaling your period of army service, separation date and type of discharge. Now you can download the eligibility form from the Internet.
Even though the primary mortgage categories — conventional, FHA and VA — need around the same period to reach closure, an incomplete application can delay the process. Do everything you can to respond when a lender asks you for additional documents, including a letter of justification. Mortgage lenders need to close loans quickly, but desire finished applications to make final approval decisions. Applications are useless to them. They often put these applications while anticipating the requested documentation. Your information can quickly become rancid, slowing down the process further, requiring further processing and setting a date.