Your Mortgage: Why does a loan take days or weeks to get approved?

Mike Miles from Fountain Mortgage walks you through the mortgage process.

Here is maybe one of the most boring questions I’ve ever asked: is anyone ever curious what happens during the life of a loan before the big closing day? Does anyone envision a vanilla folder stuffed full of papers stacked on a leaning pile of other folders on top of a desk waiting to be reviewed by a cantankerous underwriter with a huge rubber stamp?

The good news is that that mental image isn’t the reality at all. A mortgage loan travels through many layers as it makes its way through the process, and here is a quick summary:

  1. Loan pre-approval/loan origination – This is when a loan officer pulls credit, obtains basic income and asset documentation, completes a loan application, and obtains an initial approval based on client needs and loan guidelines. The initial approval is generated by an AUS (automated underwriting system).

  2. Loan compliance – This is when the finished loan application is checked for accuracy and compliance on things like disclosures, dates, and loan costs before the application is sent for borrower signatures.

  3. Loan processing – This is when the loan is transferred to a loan processor. The processor performs a pre-underwrite review of the loan. Processors may request additional documents from borrowers, and they begin verifications related to credit accounts, assets for closing, employment, and income. They also assign loans to underwriters and continue communicating between underwriting,  borrowers,  and loan officers.

  4. Underwriting – This is when underwriters confirm/verify that all loan documents provided by borrowers, loan officers, and processors satisfy loan guidelines.

  5. Pre-closing compliance – This is when the loan package is reviewed by quality control personnel. This is basically an internal second-level review ensuring that all previous levels (loan origination, processing, and underwriting) have been properly documented and completed.

  6. Closing prep – This is when the loan is prepared for closing by a person called the “closer” who works for the lender. This person sends the closing package to another closer at the title company. This is generally when a closing disclosure is sent to the borrower and title company at least three days prior to closing.

  7. Loan closing – This is when the loan documents are signed by borrowers and notarized, and is typically done by the closer at the title company.

Pretty easy, right? There are about 7 to 10 people involved with a mortgage loan overall. While that might seem like too many, lending regulations and guidelines demand it due to the levels of documentation required. What’s described above is a general overview of a loan’s life before being consummated (closed). This process can take anywhere from an average of 20 days to as long as 45 days depending on which lender you choose to use. So choose wisely, and vet your mortgage lender carefully!