Homebuyers and the properties they want to purchase each must pass several evaluations to gain mortgage loan approval. A home appraisal is a necessary part of the loan origination process, since it gives the lender detailed information about a home's market value and condition. Most lenders hold off on fully underwriting your loan until they have a completed appraisal in hand. Verification requirements and snags can prolong the traditional 30-day closing time frame by several days or weeks.
Appraisal Function and Protocol
The appraisal inspection, required on most refinance transactions and all purchases, involves coordination between three main parties: the homeowner, the lender and the third-party appraisal company. Once scheduled, the appraisal inspection can take anywhere from 15 minutes to several hours, depending on the property size and type. The appraiser must walk-through the home, inspect its visible components to determine whether the home is structurally sound and meets the lender's standards for health and safety. The appraiser also tours the property grounds and it surrounding area to gather comparable home photos and information.
Appraisal Turn Times and Underwriting
The appraisal report can take three to six hours to complete after the appraiser visits the property. A standard appraisal report completed on a "short form" -- typically 10 pages or less -- takes less time than the more complex "long narrative form," which can take weeks to months to complete, according to the All Area Appraisal Affiliates Network. After submission to the lender, the formal underwriting process begins. Assuming the lender has a complete file, which includes the loan application and all supporting documents and verification forms that concur with the application, underwriting takes about 2 business days, resulting in subsequent loan approval.
Underwriting May Require Further Investigation
A lender may require further financial documentation and an appraisal re-inspection. Lenders typically order their own employment, income and bank verifications to complete their file and safeguard themselves against misinformation or loan fraud. Each verification can delay final loan approval by at least two business days, according to Rob Chrisman for The Mortgage Reports. If the appraisal report indicates a home's condition fails to meet the lender's requirements, the lender may require specific repairs and re-inspection to confirm proper completion. Depending on the scope of work, lender-required repairs and re-inspection may add several days or weeks to the loan approval process.
Other Potential Delays
Other snags can delay final loan approval and closing, such as a low appraised value. In the event the home is worth less than the contract sales price, the lender may require the borrower to make up the difference out of pocket. A buyer also can try to negotiate a sale price in line with the home's appraised value. Renegotiating a sales contract or accessing and verifying additional funds to make the deal happen can add several days or weeks to the final loan approval time frame, depending on how long the parties take to iron out the details.
Karina C. Hernandez is a real estate agent in San Diego. She has covered housing and personal finance topics for multiple internet channels over the past 10 years. Karina has a B.A. in English from UCLA and has written for eHow, sfGate, the nest, Quicken, TurboTax, RE/Max, Zacks and Opposing Views.