The path every loan takes
The seven steps of a mortgage from application to closing
1
Application
Your income, assets, debts and the property
2
Credit and AUS
Credit pulled, file run through the AUS
3
Processing
Appraisal, title, insurance, documents gathered
4
Underwriting
Underwriter issues conditional approval
5
Conditions
You and the processor clear final items
6
Clear to close
Closing Disclosure 3 business days ahead
7
Closing
Sign, fund, get your keys
The path every loan takes. The highlighted steps are where approval is decided.
Two decision makers: software, then a person
First, your file is run through an automated underwriting system, or AUS. It weighs your credit, debt, down payment, reserves and the property together and returns findings in minutes. Then a human underwriter reviews the file to confirm everything the system was told is true and documented.
The findings decide which path your loan takes. Learn how to read AUS findings, including what "refer eligible" really means.
What underwriters look for: the four Cs
Credit: how you've handled debt, especially in the last 12 months.** Capacity:** whether your income supports the payment.** Capital:** your down payment and the cash you'll have left after closing.** Collateral:** whether the home supports the loan, confirmed by the appraisal.
Why one lender says no when another says yes
Program rules are only the starting point. Lenders add their own stricter rules, called overlays. A file one lender declines can be approved by another using the exact same program. How lender overlays work.
Conditional approval and clear to close
The underwriter issues a conditional approval listing what's still needed: updated pay stubs, an explanation letter, a source for a deposit. Once those are cleared, you get the clear to close. Common conditions and what not to do before closing.
When there's no automated approval
FHA, VA and USDA loans have a second path. A refer can be approved by a human underwriter following the program's manual standards. See VA manual underwriting and FHA manual underwriting.
The timing rules
Your lender must send a Loan Estimate within three business days of your application, and a Closing Disclosure at least three business days before closing. Certain changes after that, like a new loan product or a rate increase beyond a set amount, can restart the three day clock.
Go deeper on the process
Underwriting, approvals, conditions and problems before closing.
Frequently asked questions
How long does underwriting take?
Automated findings come back in minutes. Full underwriting usually takes days, and the whole process from application to closing commonly runs about 30 to 45 days, depending on the loan and how quickly conditions are cleared.
What does clear to close mean?
All conditions are satisfied and the lender has approved the loan to move to closing.
Can I be denied after a conditional approval?
Yes, if something can't be verified or changes, like a new debt or a job change.
Go deeper