How Many Days Before Closing Do You Get Mortgage Approval?
When it comes to mortgage loan approval, the answer to the question 'How many days before closing do you get approval?' can vary significantly based on the type of loan and the specific circumstances involved. While the process can be streamlined, it often requires adherence to federal regulations and various approval criteria.
Loan Approval in 2-5 Working Days
In May 2020, lenders were typically able to approve loan applications within 2-5 working days from the time they were submitted. This quick approval process was made possible by advancements in underwriting technology and streamlined processes.
Conditions and Requirements for Approval
It's important to understand that loan approval is not a one-time decision but an ongoing process. Approval comes with conditions, which can be categorized into two types: prior to document conditions (PTD) and prior to funding (PTF).
PTD Conditions
PTD conditions are more serious and often include requests for updated pay stubs, bank statements, or letters of explanation for issues such as employment gaps or late payments. These conditions must be met before the lender can proceed with finalizing the loan documents.
PTF Conditions
PTF conditions are more routine and less severe. They typically include things like agreeing to a higher interest rate or making a certain down payment. Meeting PTF conditions ensures the lender can fund the loan.
The Approval Process and Timeline
After your loan officer submits your application and any required documents to the underwriter, these documents enter a review queue. Having conditions attached to the approval can add additional days to the process. It's estimated that having conditions could increase the time to approval by a few days.
Once the underwriter has reviewed and approved all PTD conditions, the loan is in a "clear to close" (CTC) status. At this point, the lender can issue the loan documents. After you sign these documents, the lender reviews them and sends the funds to the escrow or title company, allowing you to close the escrow on the same day or the next day, depending on the recording policies in your area.
The simple answer is that mortgage approval can be granted within as few as 3-5 working days. This timeline, however, can be influenced by various factors, including the complexity of your loan and the time it takes to address any conditions that arise.
Real Estate Transaction Contingencies
Your purchase contract likely includes a loan contingency clause, which allows you to back out of the deal if you are unable to secure a mortgage for some reason. The typical contingency period ranges from 17-21 days, but this can be negotiated between the buyer and seller.
For a smooth transaction, it is advisable to provide all requested documents to your loan officer from the outset and follow up after receiving conditional loan approval. By doing so, you can typically complete the purchase within a 21-30 day timeframe.
Conclusion
Understanding the mortgage approval process and timelines can help you make informed decisions and manage your expectations effectively. By being proactive and responsive, you can navigate the complexities of mortgage approval and secure a smooth closing.