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How long does a loan stay in underwriting

By Nooreen B Reviewed by Sarah R Edited by Izzy M
Modified on February 20, 2024
how long does a loan stay in underwriting

Any loan you apply for, secured or unsecured, will have an underwriting process. This process allows lenders to verify financial information for an applicant. Underwriting is an important step lenders take to protect themselves. 

Wondering how long does underwriting take? The amount of time your loan stays in underwriting can vary quite a bit depending on the lender, loan type, and your information. You can expect a range between a few days up to a few weeks. 

Knowing more specifics on wait time and the underwriting process in general, will be helpful as you begin the search for loan types. Continue reading to learn more about loans and underwriting. 

More Information on Underwriting and Why Lenders Conduct It?

As someone applying for a loan, you may not have come across the word underwriting before. That is likely because it is usually referred to as pre-approval, pre-qualification, and final approval on the borrower’s end of things. 

Underwriting involves different stages of the qualification process. With pre-qualification or pre-approval, lenders will look at some basic information as estimates, things like income, credit score, and ability to repay the loan. If you pass this part of approval, you can move on to final approval, which will involve documentation and detailed information. Some loans like mortgages will have conditional approval, which is right in between pre-approval and final approval. 

The kinds of documents and information your lender will need will depend on the loan type you are applying for. 

What Documents Will I Need for Underwriting?

If you get to move past pre-approval and pre-qualification, you will need to submit some documents to prove your identity and finances. Here is some information that most lenders will ask for: 

An ID or Multiple Proving Your Identity

Lenders will need a valid government-issued photo ID and social security number to verify your identity. Your ID can be a driver’s license, passport, military ID, or permanent residence card. 

Documents Proving Income

You will need to prove your income with every loan type. You can use documents like pay stubs, invoices, letters of income (financial documents that show income for non-traditional sources such as a reward letter), bank account statements, etc. With this, your lender can be confident that you will be able to repay your monthly minimum balances. 

Information on Employment

Another thing some lenders will look at for final approval is employment verification. You can prove your employment through an employer letter, bank statements, and tax returns. 

Documents for Residency

You will need to verify and prove your address. You can use documents like recent mail, bank statements, utility bills, or a lease agreement to do so.  

Details on the Asset (If Applicable)

If your loan is secured, you will need specific documentation on the asset. One example, as mentioned above, is the documents/processes you will need with a mortgage loan. Another example is a car title loan. Because these loans are secured with a vehicle, lenders will need the car’s title, VIN number, and an inspection of the vehicle. 

Approximate Wait Times Depending on Loan Types 

How long a loan will stay in underwriting largely depends on the loan amount, loan type, the lender you are working with, and your financial situation. 

Here are some examples of typical loans and information on their underwriting process, including approximate timelines:

Mortgages — Approximately 2-3 Weeks for Final Approval

The mortgage underwriting process involves a few different processes before final approval. 

The initial stages of the mortgage loan process include a mortgage loan officer asking about income, credit history, and ability to repay, which is pretty standard. With pre-approval and conditional approval on the home loan, you can begin looking at properties. These steps for a mortgage usually take up to a week.

Although the beginning part of a mortgage application is pretty similar to other loans, the rest of the mortgage process will look somewhat different. The documentation required to get to the final mortgage approval process will vary quite a bit when compared to other loans. 

For the final stages of mortgage underwriting, you will need things like an appraisal and title search, proof of the down payment, and an inspection of the property. Along with this, you will need to be okay with a hard credit check to review your credit report and the standard financial documents like proof of income, proof of residency, etc. (listed above). Final approval can take approximately up to two weeks for a mortgage. 

Personal Loans — Up to One Week for Final Approval

Personal loans are some of the most versatile and popular loan options available. With these loans, your lender will be a huge component in determining wait time. Banks and credit unions can have a longer processing time than online lenders. You can accept a pretty instant pre-approval for these loans once you fill out a basic application. Once pre-approval is done and you send in the required documents for your personal loan, you’ll know about final approval in a few days, usually up to a week. 

Payday Loans — Same Day or Next Day Final Approval

Payday loans are a short-term financing option that makes a small amount of funds available. They offer flexibility for bad credit borrowers; however, their high-interest rates and short repayment terms make them challenging to pay back. The only thing payday lenders will need to look at when you apply for a payday loan is to verify your identity and your income. Once you submit that information, you will usually know about approval right away or in the next 24 hours. 

Car Title Loans — Up to One Week for Final Approval

Car title loans, also called title loans and auto title loans, use a borrower’s vehicle as collateral. Loan approval will be based on the value of the vehicle, income, and your ability to repay the loan. Pre-approval involves some basic questions about your car and your finances, which lenders will let you know about pre-approval right away. And then for final approval, once the documents you need are sent in will take up to one week. 

Credit Cards — Up to One Week for Final Approval

Credit cards are a form of revolving credit, which means they can be used for multiple purchases until your credit limit is reached. Once you get to that limit, you can pay that card to be able to use it again. When it comes to the wait time for pre-approval, you will likely find out either right after applying or usually within the next day. You can expect up to a week of wait time for final approval. 

How to Speed Up the Underwriting Process

Ideally, you won’t want to wait longer than you have to to find out about loan approval. It’ll make it easier to compare loan options and find the best one. Here are some tips to speed up the underwriting process: 

Provide The Right Documentation

The proper documentation will help speed up the process significantly. Whether you are providing income documents, residency information, or anything else, make sure things are up to date, clear, and have the information that your lender needs. If you are unsure about what to send in, you can ask your lender directly. 

Ensure Your Application Is Correct 

Before you submit your application, it will be important to ensure that your information is correct! Even a small mistake can increase the time it takes to find out about approval or cause lenders to deny your application altogether. And so, take a careful look at your application before submitting it!

Check Your Credit Reports Before Applying for a Loan 

The last thing you want is to apply for a loan if you have existing errors on your credit reports. It can mean denial of several loan applications, limited amounts, and having to apply for the loan again, once those errors have been corrected. 

You can get a free annual credit report from all three credit bureaus, making it easy to take a quick look at things. Credit reporting errors are common; the good news is that being on top of them and fixing them can be pretty straightforward. In the case of identity theft, however, things can get a little more complicated.

How a Loan Application Can Impact Your Credit Score 

Your loan application will impact your personal finance in many ways, including your credit score. Hard credit checks are a part of the later stages in the underwriting process, and each hard credit inquiry will bring down your credit score by a few points. And so, it will be important to avoid several of them in a short period of time.

This is where pre-approval can help! Instead of going through hard credit checks for every loan choice you are looking at, it will be smarter to apply for pre-approval, which does not usually involve hard credit inquiries (mortgages will sometimes be the exception to that rule). 

Another thing to keep in mind is that taking out a loan can impact your debt-to-income ratio and your credit utilization. 

Your debt-to-income ratio does play a role when you apply for new credit accounts. The more debt you have, the higher this ratio is, and a large loan may make it difficult to get additional funding in the future if it means a significant increase. 

Your credit utilization is the amount of debt you have to the amount of available credit you have. Having this ratio over 30% can harm your credit score. And so, definitely keep that in mind before you decide on taking out a loan. 

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