Closing a mortgage insured by the Federal Housing Administration (FHA) or any other mortgage requires going through an approval process. Most mortgage companies advise their clients that the loan process could take 30 days or longer from application to closing. The process can be done more quickly, but this assumes there are no delays or issues that arise when the lender reviews the mortgage. Additionally, there are some mandatory wait times that must be observed when closing a mortgage loan.
Once you sit down with your loan officer and fill out the application, the next step is to provide your loan officer with all the required documentation. FHA requires the homeowner provide proof of their income and assets, if you have to bring money to close. The loan officer then forwards the entire loan package to the lender's underwriting department. The lender then puts the loan in line with the rest of the loans they are working on, and eventually an underwriter reviews all of the documentation. Depending upon how busy the lender is, this process can take as little as a day or two or as long as several weeks.
Part of the loan approval process includes receiving documentation from several other third parties. Some of this documentation, such as a credit report, is available almost immediately. However, FHA requires a full appraisal on most loans. This requires scheduling an appraisal with an FHA-approved appraiser, having the appraiser visit the home and then waiting for the appraiser to complete the report. Depending upon how busy the appraiser is, this process can also take several days. Additionally, the lender must obtain a title report from the title company, which usually takes a day or two. Once the loan officer receives these documents, they must then be forwarded to the lender's underwriting department for review as well.
Several issues can delay the closing of a loan. If the lender's underwriting department has questions about any part of the loan, they may delay the approval until they find the answers to their questions. A lien could pop up on the credit report of the title report, which doesn't belong to you. The lender will have to prove it does not belong to you before they can ignore it. Additionally, many delays com just based on how busy everyone is. Sometimes lenders are so busy they cannot review a file for several weeks after it submitted. Ideally, they can review your file in 24 to 48 hours, but this is not always the case.
Mandatory Waiting Periods
There are some mandatory waiting periods that mortgage originators must observe when closing a mortgage loan. When you first apply for the loan, the mortgage lender cannot close your loan for at least seven business days after you receive the disclosures. So it could be as long as nine days between when you sign the application and when you are eligible to close. Additionally, if you close an FHA refinance loan, you will have to wait three business days after the closing of the loan before you receive your funds. For example, if you closed on a Monday then Tuesday, Wednesday and Thursday would be your three business days and then the loan would fund on Friday. In addition, if the terms of your loan change significantly, you may have to wait three additional days between when the loan changes and when the lenders allow to close a loan.