How Long Does the Loan Approval Process Take

In a perfect world, it should only take a couple of days from the time an underwriter receives a file to issue what you refer to as an "official approval." What you are really asking about, though, is referred to in the business as an "unconditional commitment," which is the lender's way of saying, "You've answered all our questions. Your application meets all the requirements for the mortgage program you've applied for. We're loaning you the money." Needless to say, for an underwriter to issue an unconditional commitment within a couple of days after receiving the file is a rare event indeed. Instead, the typical initial response given by a lender after a file gets submitted called a "conditional commitment." This is a lender's way of saying "You've met requirements A through M for the loan; now, show us the documents to show us that you meet requirements N through Z and we'll lend you the money."

Beyond all of that, there are any number of external factors that could negatively affect the time it takes to get an unconditional loan commitment. For instance, a sudden drop in interest rates could lead to a deluge of refinance applications. As a result, lenders would probably be short on staff and applications would take longer than usual to process until such time as they were able to hire enough people to handle the workload. Another example might be a temporary increase in applications due to impending "guideline tightening." Recently, for example, mortgage insurance companies announced that they would no longer issue mortgage insurance for loans on condominiums in "declining markets" with loan-to-value ratios of more than 90% after a certain. As a result, lots of people with only 5% to put down on purchases "got off the fence," so to speak, to beat the deadline and lenders' pipelines looked like a recently-fed boa constrictor for a while.

Now that I've given you the background information, here's what I think you really want to know: Under normal circumstances, it shouldn't take longer than three to four weeks to get to closing on a purchase transaction. If you get your "official approval" and can close in less than three weeks, everyone involved is doing a very good job. In busy times, it might take a little longer, but most lenders make every effort to give priority to purchases. Refinances usually take a little longer because the urgency isn't as great as with a purchase -- though lenders have been known to "rush" files under certain circumstances.

As much as there are times when it looks like things are taking "way to long," rest assured that most lenders want to close files as efficiently and quickly as circumstances permit. If you are working with a reputable company and a professional loan officer who regularly communicates with you, you'll know, at the very least, the reason for any delays.