This is a fairly common question that I get asked on a regular basis.
The process does take time whether you are purchasing a property, requesting an equity take-out, or a refinance mortgage.
Average Time to Close a Home Loan
Purchase: This of course truly depends on the closing date of your purchase property. The actual process to get your documents reviewed and tell you where things stand is 24-48 from the time I receive your documents. Now, this is just my time frame, I cannot speak for any other mortgage agents out there. From the time your file is submitted to a lender, if there is a finance condition on your offer, the lender will reply within that time frame. Standard finance condition is 5 business days; I have advised some of my clients that they are fine to do a 3 business days finance condition. Many lenders due to the massive increase in business are requiring 7 business days. Once an approval for example is given, then the mortgage will close based on the closing date of your property which can be one month, two months and even three months. Your mortgage agent should advise and guide you through this process so you know what to expect as there are other stages involved before closing.
Equity Take-out and Refinancing: The time frame for me to review is the same as noted above. Review from a lender once the file is submitted can take at least seven business days on a refinance or equity take-out deal. The more complex the file, the longer it will take for the lender to fully review and give a reply on an approval or decline. The entire process can take at least five weeks from the time the file is submitted to a lender. As also noted above, there are a few stages involved in every type of transaction, your mortgage agent should prep you ahead of time.
A 24-hour approval time frame is not the norm and should not be expected; loans are now being thoroughly processed before landing on the lender underwriter’s desk. Clients can sometimes take at least a week before sending their documents to their mortgage agent for review, this all adds up to the overall time frame from the time you connect with an agent to when your mortgage closes.
These numbers give you an idea of what to expect, but like everything in life, there are always exceptions. There are mortgages that will close much faster than what is noted above; every loan application (and borrower) is different. But as a rule of thumb, the cleaner and more straight forward your application is from the start, the quicker the process should go.
Not all lenders are equal in how they operate, some can take longer than another because they are more conservative which means longer to review files, while others can close a file in 4 weeks. The type of transaction and the type of lender (prime banks, alternative banks or private lenders) is an important fact to take into consideration regarding time frame. Type of employment plays another key role, employee vs. self-employed. Much more time is needed to review a self-employed borrower than a borrower who is an employee.
Why Do Mortgages Take So Long?
A lot of different parties are involved in the mortgage and/or home buying transaction and there are regulated timelines that must be followed. If a home appraisal and inspection is needed, these can also take a couple weeks to be completed depending on how busy they are. Therefore, it’s best to be patient and cooperative to ensure a smooth closing.
The mortgage process also requires a lot of hands to touch the loan before it actually closes - a mortgage agent, an underwriter, a processor, an appraiser, a title company, an insurance company, a funder (bank or lender), and a closer etc.
Even in the best-case scenario, where you do have a clear and straight-forward application, it can still take several weeks.
As noted above, part of a mortgage process is a home appraisal, which is usually (not always) required. This is to ascertain the true market value of the property in question. This process can take 7-10 days or longer, depending on the schedule of the appraiser, location of the property and type of property (commercial vs. residential -- larger residential vs. smaller residential). Depending on the type of transaction a lender can request an appraisal upfront before fully reviewing a file but on a standard basis an appraisal is requested after an approval is given by the lender.
Fixing your closing date on your purchase is decided when placing an offer on a property, needless to say, this is a key component as to how long before everything is wrapped up and you get the key to your new home.
When you make your choice as to which mortgage agent you will choose to facilitate your mortgage (as most borrowers do shop around before making a decision), ensure he/she discusses all aspects of the process, a good mortgage agent will give you the time to ensure you are aware of everything and to guide you through the entire process. One of your main parts in the process is to ensure you disclose all details upfront (bankruptcy, consumer proposal, poor credit, multiple properties etc.) as this will save time down the road when these details will eventually be known by the agent and the lawyer. You want to avoid the details having to be known later in the process as this can massively delay the process and sometimes even crash the deal.