Three days. That's the fastest loan officer Scott Sheldon has ever seen someone get approved for a mortgage.
"He had every single iota of possible documentation you could imagine upfront," said Sheldon, who's a senior loan officer in Santa Rosa, Calif., and regularly writes about mortgages for Credit.com. That three-day turnaround was unusual, but so was the time it took another applicant roughly two months to get mortgage approval. "If the borrower was just a little bit more transparent upfront, we probably wouldn't have had that."
Mortgage approval is a multi-step process, but the more consumers do from the beginning, the more likely it is to go quickly. Sheldon said he's currently seeing a five- to six-day timeline for mortgage underwriting approval and about 18 days from the start of the process to issuing a commitment letter -- when the lender commits to giving you the loan. The initial underwriting approval is often contingent on receiving more documentation from the borrower.
"Many times the documentation and supply opens up more questions," Sheldon said. "We actually just had one that went upward of 45 days (for final loan approval) because the borrower's financial picture kept changing."
The cleaner your financial history, the faster your approval process is likely to go, but speed is more reliant on how much information you provide your lender from the beginning. Sheldon said the applicant whose loan approval took 45 days had a lot of financial issues -- a low credit score, previous short sale, previous foreclosure and outstanding debt with the Internal Revenue Service -- and these problems weren't clearly disclosed from the start.
"My best advice to buyers is let your lender pre-approve you -- give them at least 72 hours to really pre-approve you with all your financial documents, including a credit report," Sheldon said. He said consumers often expect pre-approval in a day, but that's not enough time to thoroughly complete the process, especially if important documentation hasn't been submitted. "All loans today go through automated underwriting. ... It's only as good as the information we put in there."
If the pre-approval is based on flawed information, borrowers risk needing the lender to pull together a loan while they're trying to sign a contract for a property. Loan issues could complicate the transaction, which is something to avoid when making one of the largest financial decisions of your life. Before you start shopping for a home, look at your credit reports, bank statements, outstanding debts and credit scores (if you don't know what your credit profile looks like, check Credit.com's free credit report summary, updated every 30 days, to get an idea of how lenders see you), and be prepared to keep supplying paperwork as they request it. You can also get your free annual credit reports on AnnualCreditReport.com.