Refinancing your house means you are getting a new home loan, so it can take some time. In many situations, refinancing a home takes 30 to 45 days.
But the exact time to sit down at the closing table depends on many factors, and some of them you do not control. You might be able to close faster, however, if you understand the refinance process.
Timeline for a Mortgage Refinance
As we mentioned above, it takes 30-45 days on average to close a refinance. Ellie Mae reports that it took about 50 days, typically for all loan types to close in August 2020. FHA and VA loans take a bit longer to close than conventional loans.
We can understand one thing for sure from the Ellie Mae report: Lower interest rates are causing longer close times. The refinance process now takes more than two weeks longer on average than it did in March 2020. That was when mortgage rates hit all-time lows.
Do You Want To Refinance Your House Faster?
If you want to get your refinance loan closed faster, experts recommend following these steps.
Know the Reason You Want to Refinance
One of the most vital aspects of a home refinance is understanding your financial goals before you start the process. If you backtrack and change your goals during the process, it will slow things down. For instance, you may not need a home appraisal if you only want to lower your payment and rate. Not having an appraisal can save you 1-2 weeks during the refinance process.
But if you decide suddenly you want to pull out equity to remodel your kitchen, it will add time to the mortgage refinance process. The lender will need a new appraisal. The new loan must be approved for the higher loan amount, pushing out the closing date. Also, pulling out cash is deemed a higher risk loan by lenders to extend the underwriting process.
Find Loan Options That Align With Your Financial Goals
If you choose the wrong mortgage program, that could add days or weeks to the refinance process. It can cost you both money and time if your mortgage company must deny your application or find a program that fits better with your financial goals.
Here is a quick rundown of refinance programs to consider based on your financial situation:
- Good credit score and desire a lower interest rate: Conventional loan, rate, and term refinance
- Poor credit and desire a lower rate: FHA rate-and-term refinance
- Military member or veteran and desire a lower rate: VA rate-and-term refinance
- Have an FHA loan and want a lower rate: FHA streamline
- Want equity and have good credit score: Conventional cash-out refi
- Want equity and have bad credit: FHA cash-out refi
- Want equity and are a military member: VA cash-out refinance
Find Out What Your Home Is Worth
Mortgage lenders base the amount for a refinance on your equity. So watch what the prices are for homes in your area that are similar to yours. Put an address into a home value estimator to get an idea of what your house might be worth. You also can call your real estate agent and get a COA or comparative market analysis for a more exact home value.
Remember to be realistic with your home value estimate. If the appraisal’s value comes in lower, the mortgage lender may adjust the loan’s costs and interest rate. The process might take longer as the underwriter goes over the changes.
Choose a Refinance Product That Doesn’t Need an Appraisal
Having a home appraisal adds at least two weeks to the mortgage application process. If you choose a mortgage program that does not require one, you can save a lot of time. If you only want to lower your rate or change your loan term, you may be able to get a no-appraisal loan:
- Conventional loan appraisal waiver: Fannie Mae and Freddie Mac back these loans. Fannie Mae sometimes offers appraisal waivers if you have at least 10% equity. Freddie Mac mandates at least 20% equity to be eligible for a waiver.
- FHA streamline: If you have an FHA loan, you may qualify for a fast, easy refinance with no appraisal. Your lender also might not check your income or credit.
- VA interest rate reduction refinance loan: Military borrowers who are current on their loan can roll their closing costs into the loan. You do not need income documentation or an appraisal.
Inquire About Refinance Timelines
When rates are very low, lenders get a lot of refinancing requests. Be sure to check with three to five lenders about their rates, and you also should:
- Ask how long it takes them to process applications on average. Lenders should be able to tell you if the loans are taking 30 days, 60 days, or more.
- Shop around: Don’t stop with just one or two quotes. Some lenders might raise their rates temporarily, so they do not take on too much business.
Collect Your Financial Documents Ahead of Time
How quickly your application can be mainly processed depends on the quality of your application. If you have missing or incorrect information, there will be delays in the process. Make sure you have all the documentation required and that you fill out the application accurately:
- Pay stubs for the current month
- W-2s for the previous two years
- Contact information for your employers for the last two years
- Two months of bank statements
- This month’s mortgage statement
- Up-to-date homeowner’s policy with full contact information
- Updated property tax statement
Remember, the lender will verify your employment at least twice. If you change jobs, tell your lender right away.
Mortgage refinances do not usually take as long as original mortgage loans, with 30 to 45 days being standard timelines. If you follow our tips above, you might be able to shave a few days off those times and get to the closing table faster.
- Refinance Your Home. Accessed at https://www.investopedia.com/mortgage/refinance/
- Ellie Mae Insight Origination Report. Accessed at EM_OIR_AUG2020.pdf (elliemae.com)
- Is Refinancing Your Mortgage A Good Idea? Accessed at https://www.investopedia.com/ask/answers/09/refinancing-mortgage.asp