- This article explains what happens after a home appraisal, during a typical real estate transaction.
- For many buyers, mortgage underwriting is the next major step in the process.
- It can take one to four weeks to close on a house (on average), once the appraisal has been completed.
We receive a lot of questions from our readers relating to the home appraisal process. In this article, we’ve addressed some of the most frequently asked questions sent in by readers over the past two years.
Assumptions: This article is geared toward home buyers who use mortgage loans to help finance their purchases (which is most buyers). If you’re paying cash for a house, some of the steps below will not apply to you.
What Happens After a Home Appraisal?
Let’s start off with what’s clearly the most common question on this subject: What happens after the home appraisal is finished? What’s the next step in the process?
Mortgage underwriting is usually the next stage that occurs, once the appraiser has completed his or her report. The mortgage lender’s underwriter will review the loan file to make sure all required documents are present. The underwriter will also assess the risk level associated with the loan, and give an approval or denial based on that.
But let’s step back for a minute and look at the steps that lead up to (and come after) the appraisal.
An Overview of the Process
While the mortgage and home-buying process can vary from one person to the next, it usually follows the steps outlined below:
- Pre-approval: The home buyer gets pre-approved for a mortgage loan, to find out how much they are able to borrow. This also helps them narrow the home search to a specific price range.
- House hunting: The buyers search for a property that meets their needs and also falls within their budget. They would then submit an offer, possibly making an earnest money deposit as well.
- Purchase agreement: The buyer(s) and seller agree on a purchase price, choose a desired closing date, and sign the real estate purchase agreement / contract.
- Home appraisal: The mortgage lender will order an appraisal shortly after the purchase agreement has been signed, at least in most cases. They do this in order to determine how much the property is worth based on current market conditions.
- Mortgage underwriting: The loan file then moves on to the underwriter, who reviews all of the documents and determines whether or not the borrower can proceed to closing. This is the most intensive screening process that occurs along the path to final approval.
- Underwriting conditions: In some cases, borrowers might receive what’s known as a conditional approval. This means there are still some items that need to be resolved or explained. (Note: This doesn’t always happen. Some home buyers “sail through” underwriting and go straight on to the closing.)
- Closing: This is the end of the transaction, from the buyer’s perspective. You’ll sign a bunch of paperwork, pay closing costs and other items that are due, and get the keys to your new house. These days, most or all of the process can be handled electronically, using digital documents.
So getting back to the first question: What happens after the home appraisal?
As you can see, the next step in the process is usually mortgage underwriting. And that makes sense, because the appraisal is one of the documents the underwriter will review. So it’s only logical for the steps to proceed in this order.
How Long Until the Closing?
The second FAQ we’re addressing here is: How long does it take to close after the appraisal takes place?
In a typical transaction, it might take anywhere from one to four weeks after the appraisal for the borrower to reach closing. But this can vary. It largely depends on whether or not the underwriter identifies issues or conditions during the underwriting stage, and how quickly the borrower resolves those issues.
There are a lot of variables involved with a mortgage transaction. Some loans and home sales are more complex than others. So the process can vary from one borrower to the next. This is true for the home appraisal process as well.
For example, note the difference in these two scenarios:
- In some cases, the appraiser will determine that the home is worth as much as the sale price, or even more. If that’s the case, the process moves forward into the underwriting stage.
- In other cases, the appraisal will “come in low.” This means the home was appraised for less than the purchase price. In this scenario, the buyer might have trouble getting approved for the necessary loan amount. So, the buyer and seller might have to go through a second round of negotiations.
(For more on this subject, view how to negotiate after a low appraisal.)
The underwriting process can vary as well. Some borrowers encounter issues that need to be resolved before the underwriter will give them a “green light” to close the deal. Other borrowers sail through the process with no issues whatsoever, and reach the finish line sooner.
So, the length of time between home appraisal and closing can vary from one transaction to the next — sometimes significantly. But it generally ranges between one to four weeks.
How Home Buyers Can Help Themselves
As a home buyer, you don’t have very much control over the mortgage underwriting process. It unfolds without your involvement for the most part. But there are some things you can do, after the appraisal and prior to closing, to help keep the process on track.
1. Keep the lines of communication open.
Stay in touch with your loan officer (or other point of contact) throughout this process, to make sure he or she has what they need to move toward closing. Also, keep an eye out for your “Closing Disclosure” document. The lender is required to send you this five-page document a few days prior to the closing. It tells you how much you’ll have to pay when you close.
2. Follow up in a timely manner.
If you receive additional paperwork requests from the loan officer or underwriter, try to resolve them as quickly as you can. This can help prevent unwanted delays. Everyone wants the loan to move forward, and it takes a group effort to make that happen. So be sure to handle these requests in a timely manner.
3. Maintain the financial status quo.
It’s best to avoid making major purchases or bank withdrawals between the home appraisal and closing. If your financial situation changes significantly during this timeframe, it could raise a red flag or even derail the loan process. Keep in mind that some mortgage lenders do another credit check just before closing.
Summary of Key Points
We’ve covered a lot of useful information in this article. So let’s wrap up by summarizing some of the most important points you should take away from this.
- In a typical real estate transaction, mortgage underwriting is usually the next step after the home appraisal has been completed.
- The broader home-buying process typically involves mortgage pre-approval, house hunting, the offeror and negotiating stage, home appraisal, mortgage underwriting, underwriting conditions (in some cases), and the final closing.
- The length of time between the appraisal and the actual closing day can range from 1 to 4 weeks, depending on a number of factors.
- Mortgage underwriting involves a detailed and intensive review of the loan file, the borrower’s qualifications, and the property that’s being purchased.
- You might receive additional requests from the underwriter, such as a letter of explanation regarding a certain financial transaction.
- As a borrower, you can help expedite the process by handling these additional requests in a timely manner.
Disclaimer: This article explains what happens after a home appraisal, in a typical real estate transaction. This information was created for a general audience and might not apply to all situations and scenarios. If you have specific questions about this process, you can refer them to your mortgage loan officer or broker.
Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author