How Long Does FHA Underwriting Take in 2021? What You Need To Know
Getting approved for an FHA loan can be a lengthy process, with underwriting often being one of the longest steps. As a potential homebuyer in 2021, you’re probably wondering – how long does FHA underwriting take?
The underwriting process is when the lender thoroughly reviews your financial history, credit report, income, debts, and other factors to determine if you qualify for the mortgage loan. For FHA loans, this critical step can take anywhere from a few weeks to a couple months.
In this article, we’ll break down the typical FHA underwriting timeline and what factors can speed it up or slow it down. We’ll also give tips on how you can help expedite the underwriting process. Keep reading for everything you need to know about FHA underwriting wait times in 2021.
What is FHA Underwriting?
Before we get into the timeline, let’s quickly recap what underwriting for an FHA loan entails.
FHA underwriting is the process where the lender evaluates your FHA loan application to ensure it meets the lending requirements set by the Federal Housing Administration (FHA) The underwriter will review all your financial documents, credit reports, debt-to-income ratio, employment history, assets, down payment funds, and more.
The purpose is to analyze your ability to repay the mortgage loan, The underwriter will determine if you’re an acceptable credit risk for the lender by making sure you meet the following criteria
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Minimum credit score requirements (usually 580 or higher)
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Debt-to-income ratio under 43%
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Sufficient income and assets
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Clean credit history with few late payments or collections
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Stable employment history
The underwriter will also review the property you want to purchase with the FHA loan to make sure it meets FHA requirements. This includes making sure the home appraises for at least the purchase price.
Once the underwriter has verified all the information and ensured you meet FHA guidelines, they will approve your loan application and issue a firm commitment letter. Then you can move forward with closing on your mortgage.
What’s the Typical FHA Underwriting Timeline?
Now let’s get into the nitty gritty – how long does it actually take for underwriting with an FHA home loan?
The underwriting process can vary drastically by lender. But on average, it takes about 6-8 weeks for underwriting an FHA loan from start to finish.
Here is a general timeline of what you can expect:
Week 1: You submit your loan application and supporting documents to the lender. This includes income/employment verification, tax returns, bank statements, and more.
Weeks 2-3: The underwriter reviews your credit report, debts, income, assets, and other qualifications to ensure you meet the minimum FHA requirements. If they need any additional documentation from you, they will request it during this time.
Weeks 4-5: The underwriter orders an appraisal on the property you want to buy. When the appraisal report comes back, the underwriter confirms the property meets FHA guidelines.
Weeks 6-7: Underwriter finalizes the loan approval decision. Once you receive loan approval, you can proceed to the closing process!
As you can see, underwriting often takes about 6-8 weeks for FHA loans. However, this isn’t set in stone. There are several variables that can impact turnaround times, which we’ll explore next.
Factors that Speed Up or Delay FHA Underwriting
When trying to estimate your personal underwriting timeline, keep these factors in mind:
Your credit score and history – The higher your credit score and the fewer issues in your credit history, the faster underwriting usually goes. If you have a complicated credit history, it will likely take more time for the underwriter to review.
Your debt-to-income ratio – FHA requires your debt-to-income ratio to be under 43%. If your ratio is on the high side, it may raise concerns and cause delays.
Employment history – If you frequently change jobs or have gaps in employment, it can hold up underwriting. Stable income sources help speed things along.
Responding to requests promptly – When the underwriter asks for additional documents, get them back right away. Dragging your feet leads to delays.
The lender’s workload – If the lender has a high volume of loans being underwritten, turnaround times are usually slower. Ask your loan officer about the lender’s current workload.
Getting your documents organized – Submitting a complete loan application upfront prevents the underwriter from having to circle back and ask for missing documents.
As you can see, there are a few ways you can help expedite underwriting based on your personal situation. Now let’s look at some tips to speed up the process in general.
5 Tips to Speed Up FHA Underwriting
If you want to close on your FHA loan as quickly as possible, here are some tips to help accelerate underwriting:
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Get pre-approved – Being pre-approved shows underwriters you’re qualified before they even start reviewing your full application. This gives you a head start.
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Ask your lender for a complete list of required documents – Submit everything upfront to prevent delays from the underwriter requesting additional items later.
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Stay on top of your paperwork – Respond right away if the underwriter asks for revised bank statements, new pay stubs, clarification letters, or any other documents.
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Avoid major financial changes – Don’t open new credit cards, take out new loans, or make big purchases during underwriting. This can raise red flags and slow things down.
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Be available to answer questions – Make yourself available by phone and email in case the underwriter needs clarification on any aspect of your application.
Following these tips will help expedite underwriting so you can close on your new home ASAP!
How to Check the Status of FHA Underwriting
Going through underwriting can feel like you’re left in the dark, anxiously wondering what’s happening behind the scenes. Fortunately, you can get updates on the status by speaking with your loan officer.
Your loan officer should be able to provide you with regular progress reports on your underwriting status. Don’t be afraid to reach out and ask questions! The more communication between you and your lender, the better.
Here are some questions to ask for underwriting status updates:
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Has underwriting started reviewing my file yet?
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What outstanding documents/information do you need from me (if any)?
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Is the underwriter waiting on any third-party verifications or reports?
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Have there been any issues so far in underwriting?
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What underwriting stage are you in currently?
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How much longer do you estimate underwriting will take?
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What’s the soonest I can expect a final loan decision?
Staying looped in can help prevent surprises and keep your loan on track to close faster. Be sure to give your loan officer the green light to provide status updates along the way.
The Bottom Line
Underwriting is often the longest step when getting approved for an FHA mortgage loan. On average, you can expect the underwriting process to take 6-8 weeks. However, it can be shorter or longer depending on your personal financial situation and credit history.
The best thing you can do is submit a complete application, respond to underwriter requests ASAP, and avoid major financial changes. This will help expedite underwriting so you can move forward with buying your dream home.
With an organized application and proactive communication, you’ll be set up for success! Just remember to be patient, even though waiting for underwriting to finish can be the hardest part. The finish line is near – you got this!
What’s involved in the mortgage underwriting process?
Regardless of whether you’re buying or refinancing, the underwriting process is very similar.
Underwriters look closely at your financial situation. They need to verify the information you gave on your mortgage application by checking it against your documentation.
Most importantly, underwriters will look at your:
- Credit — Your credit scores and credit history are indicative of your likelihood to repay your mortgage loan
- Income and employment — Typically, lenders will look at your last 24 months of employment. Employment gaps may require a letter of explanation. You’ll also need to provide documentation such as pay stubs, W2s, and tax returns, depending on how you get paid
- Debt ratios — The lender will look at your monthly debts compared to your income to determine your debt-to-income ratio (DTI). This helps verify you can afford your future monthly mortgage payments. Different loan programs have different allowances for debt ratios
- Appraisal — The appraisal will determine your new home’s fair market value. This a vital part of the underwriting process. Lenders need to see that the home is worth at least as much as the contracted sales price; if not, you might need to re-negotiate the purchase price, down payment, or the entire loan
- Mortgage program — The underwriter will verify your eligibility for the type of loan you want (e.g. a conventional loan or FHA loan). Different mortgage programs have different requirements
Provided your finances check out and the home appraises at or above the purchase price, you’ll move on to the next step, which is often a ‘conditional approval.’
After the underwriter reviews your file, they will typically issue a conditional approval.
Being conditionally approved is usually a good sign. It means the underwriter expects your loan will close. However, you may need to help satisfy at least one or more conditions before that can happen.
This typically involves providing additional information and documents.
Some underwriting conditions can be fairly straightforward and easy.
For example, the underwriter may require a letter of explanation for derogatory information on your credit report. Past bankruptcies, judgments, or even late debt payments can warrant letters of explanation.
Sometimes, just a letter of explanation or two is all that’s needed to issue final approval. These types of issues can be solved quickly.
Other times, mortgage conditions may be more involved and take more time.
For example, final approval could be delayed if your lender asks for:
- Documentation to support large cash deposits in your bank account
- Additional details from the appraiser to support the value of the home
- Certain debts on your credit report may need to be paid off in order to qualify
- Bank statements, sometimes covering 12 months, may be needed to show proof of making a particular payment
- If you’re self-employed, a year-to-date profit and loss statement may be necessary
In these cases, the underwriting timeline depends on the complexity of the issue and how long it takes you and/or your financial institutions to provide these additional documents.
Ideally, once the terms of your conditional approval have been met, the underwriter will issue final approval. This means you’re ‘clear to close.’
If you’re denied, ask your lender why, and what you can do to have the decision overturned.
A mortgage can be denied if the terms of the conditional approval aren’t met, or if your financial information has changed since you were pre-approved.
For instance, if your credit score falls between your pre-approval and final underwriting, you may no longer qualify for the loan terms or mortgage rate you were initially offered.
In these situations, the borrower might have to re-apply for a different type of loan or back out and wait until their circumstances improve before applying again.
How long does underwriting take?
Mortgage lenders have different ‘turn times’ — the time it takes from your loan being submitted for underwriting review to the final decision.
The full mortgage loan process often takes between 30 and 45 days from underwriting to closing. But turn times can be impacted by a number of different factors, like:
- Internal staffing policies
- Loan application volume (how many mortgages a lender is processing at once)
- The complexity of your loan profile (for example, someone with issues in their credit history might take longer to approve than someone with an ultra-clean credit report)
Depending on these factors, mortgage underwriting can take a day or two, or it can take weeks.
Under normal circumstances, initial underwriting approval happens within 72 hours of submitting your full loan file.
In extreme scenarios, this process could take as long as a month. However, it’s unlikely to take so long unless you have an exceptionally complicated loan file.
When you’re shopping for a mortgage, ask lenders how long it’s currently taking them to close on a home purchase or refinance (depending on your loan type).
In addition to shopping interest rates and closing costs, turn times should be one of the final factors in your ultimate choice of a lender.
How Long Is The Underwriting Process For An FHA Loan? – InsuranceGuide360.com
FAQ
How long does underwriting take for an FHA loan?
You can expect underwriting to take about a week if there are no issues present. Once your loan approval is confirmed, you can move on to signing the paperwork and closing on the home purchase. On closing day, it will take a few hours to finalize the details and sign on the dotted line.
How long does it take for the underwriter to make a decision?
Mortgage underwriting can take anywhere from a few days to several weeks. The process could be delayed if you have a complex financial situation or provide incomplete documentation.Aug 14, 2024
Does appraisal happen before underwriting?
How often are FHA loans denied in underwriting?