Reader question: “My husband and I are planning to use an FHA loan buy our first home. We are trying to figure out the timing so that it coordinates with our current apartment lease, moving, etc. How long does it take to close on an FHA loan these days? I’ve heard some people say it takes longer than it does for a regular mortgage loan. Is this true?”
The entire application, underwriting and funding process could take anywhere from 30 – 60 days. If it takes less than 30 days, you’ve got a highly efficient mortgage team. If it takes longer than 60 days, there’s some kind of problem slowing things down.
That’s the short answer. Now let’s examine the different stages in the process. This will help you understand how long it might take to get an FHA mortgage.
Sample FHA Timeline
More than anything else, the three stages below will determine how long it takes to close the deal. You’ll soon realize how many variables there are along the way (and why I’ve given you such a broad estimate).
1. Application and origination: This is when you submit a mortgage application with an FHA-approved lender. The lender will then originate the loan, which is a fancy way to say they’ll start the paperwork. This is when the terms of the loan are established, and when the lender and borrower commit to the agreement. It might take anywhere from 1 – 5 business days to complete this stage of the process.
2. Processing and underwriting: You’ve agreed to the terms of the FHA loan, and you’ve signed a document to that effect. Now the loan goes into the processing stage. This is also referred to as underwriting. The processor and/or underwriter will start verifying the documents you submitted when you applied for the loan. They’ll verify your employment status, your income, and your current level of debt. The loan processor will check your credit score, if this has not been done already. Their job is to make sure you meet (A) the lender’s guidelines and (B) the FHA’s basic criteria. There’s a good chance you’ll be asked for additional documents at this stage, too.
How long it takes will depend on the speed of the underwriter and the orderliness of the application packet you submitted. Thus, the underwriting stage is one of the biggest variables. It could take anywhere from 5 – 25 business days, or even longer. It will also depend on how many people are involved in the process. For example, if you’re working with a mortgage broker who is not approved to make FHA loans, he might be referring the documents to a different lender (i.e., commission-based relationship). This can slow the underwriting process down even more. If you don’t hear anything after a week and a half, it’s time to pick up the phone.
3. Loan documents: There’s a lot of paperwork involved with FHA home loans, and with mortgages in general. Wait until closing day and you’ll see what I mean. All of these documents need to be prepared by the lender, the title company, and other parties involved with the loan. How long does it take? Here again, the timeframe will vary based on two things: (1) how many people are involved and (2) how experienced they are with processing FHA loans. On average, this part of the FHA process takes 3 – 7 business days.
How Long Does it All Take?
These are not the only steps in the process. There are some other administrative steps that follow. But the three items listed above make up the bulk of the time. If all three of these steps go smoothly, you could close the deal in less than a month. If you encounter bumps along the way, it could be closer to 60 days.
Overall, you might want to allow 30 – 60 days for the entire process, between the time you apply for the loan and the day you close. This is certainly not written in stone, though. There are always exceptions to the rule, for better or worse.
Preliminary Steps in the Process
The information above relates to the period of time between the purchase agreement and the closing date. It gives you a good idea how long it takes to get approved for an FHA loan. But there are some other preliminary steps we should talk about. In reality, the FHA process starts long before the loan application — or at least, it should. Here are the steps I recommend people take when applying for an FHA loan.
1. Set up a budget before talking to the lender.
The mortgage process should always start with a good round of budgeting. Before you rush into the process, you need to know how much you can realistically afford to pay each month for the mortgage payment. Don’t make the mistake of letting the FHA lender do this for you. That’s not their responsibility. It’s yours alone. You need to take a good hard look at the amount of money you make each month, and how much you spend. On the spending side, include all of your debt obligations, savings account contributions, living expenses, entertainment, etc. On the income side, be sure to use your net income or your take-home pay. Learn more about this step.
2. Start saving your cash.
Some people are so concerned with how long it takes to get an FHA loan that they forget to ask another important question. How much is it going to cost me? When you buy a home through the FHA mortgage program, you will face a down payment of at least 3.5% of the purchase price. You’ll need a credit score of at least 580 to qualify for this down payment. If your score is below this cutoff, you’ll have to put at least 10% down. You’ll also have some closing costs to deal with as well. You can estimate these costs in advance. Do you have enough money to cover these things? If not, you might not be ready to take on a mortgage loan. This is why it’s so important to put money away early on in the planning process.
3. Check your credit reports and scores.
We recommend that all home buyers check their credit reports at least a month before buying a house. The sooner you do it, the better. You’re checking to ensure there aren’t any mistakes in your reports (you have three of them, by the way). For example, you might find out that a creditor reported you for missing payments when it wasn’t warranted. This is the kind of thing that can hurt your credit score — and your chances for getting an FHA loan. So you want to dispute these things ASAP. Learn more about why it’s so important to review your reports.
Pop quiz. What’s your FICO credit score? If you don’t know, you might want to find out now. It’s one of the first things the lender will look at, when you apply for an FHA loan. You don’t want the lender to know thing about you that you don’t know. Right? So you should find out where you stand. You can find out your credit score online, but you’ll have to pay for it in some way. Federal laws entitle you to free credit reports, but the scores usually come with a price. You can buy your TransUnion and Equifax scores through MyFICO.com. You can get your Experian score from their website at www.experian.com.
Once you’ve completed these three steps, you’re ready to talk to a lender.
This article explains how long it might take you to get an FHA home loan. If you would like more information about this topic, you can use the search box at the top of this page. You can also refer to our FHA page for more articles like this one.