How Long it Takes to Process a Mortgage

Applying for a mortgage may seem like a big step to take, but when you separate the process into bite-size pieces, it's less intimidating.

While the average time from formal loan application to closing day1 for homebuyers ranged from 43 to 51 days between January 2019 and May 2020, there are a few steps you need to take before you begin your formal application. These steps will add to your total timeline.

Budget [One Week]

Before you apply for a mortgage, it's best to start by understanding your own current financial situation.

• Evaluate your finances.
• Check your credit report at AnnualCreditReport.com.2
• Determine what would be a comfortable housing payment for you.
• Consider sources of cash for your down payment.

Tip: Financial experts typically recommend that you spend no more than 30% of your income on your housing payment.

Loan prequalification [One Week]

Before you start shopping for a home, you should get prequalified for a mortgage. This will tell you how much the bank is willing to lend you and how much you can spend on a home once your down payment is factored in.

• Gather your financial documents (pay stubs, W2, tax returns, bank statements).
• Consult your loan officer about loan options.

Tip: A loan prequalification is important for two reasons: 1) You'll know what housing price range you can shop in; and 2) Sellers will know you're serious and qualified to buy, which is especially important in a competitive housing market.

Find a home and get your offer accepted [Average: 10 Weeks]

Armed with your prequalification, you can begin seriously shopping for a home that matches your dreams and your budget.

• Shopping for a home and making an offer can take as little as a week and as long as several months. The average time it took buyers to search and get an offer accepted was 10 weeks, according to the National Association of Realtors' 2019 Profile of Home Buyers and Sellers.3
• Your loan prequalification will typically last 30 to 60 days or perhaps 90 days depending on your lender so you will need to get a new prequalification letter if you're still shopping after it expires.4

Tip: You may want or need a new loan prequalification if your situation changes, such as a job or income shift that could mean you can shop for a more expensive home.

Formal loan application [One Week]

Once you have an accepted purchase offer on a house, it's time to start a formal loan application.

• Choose your loan program (fixed or adjustable rate, 15 or 30 years, conventional, or FHA)
• Provide details of any gifts or loans for the down payment.
• Ask your lender about when to lock in your rate,5 which means your rate can't change before the closing.
• Within three days after your loan application, your lender will provide you with a Loan Estimate form that breaks down your total financing costs.

Tip: Your lender will typically lock your rate for 30 to 60 days so you can be confident that it will be the same on your closing day.

Loan processing [Two to Four Weeks]

• Your lender will order an appraisal on the home to establish the value of the property.
• Your lender will request a title search to check for liens and legal ownership.
• You can hire a home inspector to verify the home's condition.

Tip: A lender's title insurance policy is required for loans, and experts recommend that you purchase optional owner's title insurance6 to protect your investment in your home.

Loan underwriting [Two Weeks]

• Your lender will verify your job history.
• Your lender will review all your financial documents.
• Expect another check on your credit score and credit report.

Tip: Avoid taking on new debt until after your loan closes to reduce loan delays or denials.

Closing day

Three days before the closing you'll receive a Closing Disclosure form to review.

Closing costs range from 2% to 7% of the purchase price of the house. The average is 3%.

If escrow is required, your lender will set up an escrow account to pay your property taxes and homeowners insurance premiums.

At the closing, you can review your amortization table so you can understand how your loan payments will work over time.

Tip: The Consumer Finance Protection Bureau7 warns that scammers try to take advantage of buyers by emailing fraudulent wiring instructions. Don't respond to an email asking for funds until you check by phone with your title company to make sure it's legitimate. 

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