How Long Does It Take to Refinance a House?
Refinances made up 48 percent of conventional loans and 28 percent of FHA loans closed in February 2018, according to the 2018 Origination Insight Report from mortgage originator Ellie Mae. It’s clear these loans are common — what’s less straightforward is the time it takes to complete a refinance. While the time to close will vary, depending on a number of factors, understanding the process can help you feel confident as you go through it, regardless of your specific timeline.
- How long does a refinance take?
- The mortgage refinance process
- 5 ways you can speed up your refinance
- The bottom line
How long does a refinance take?
According to Jennifer Beeston, vice president of mortgage lending at Guaranteed Rate Mortgage, this is a question you should ask any mortgage lender you plan to use before you begin the process. By asking your lender ahead of time, you can get a feel for the amount of time they take to refinance, provided you don’t encounter any unforeseen hurdles after you apply.
The average refinance takes between 20 and 45 days, Beeston says. However, each lender is different, and there are plenty of variables that can speed up — or slow down — the process.
In addition to asking lenders how long they take, it’s a good idea to read reviews of lenders you’re considering, as well. Consumer reviews may not be a perfect indicator of how your refinance will go, but they can give you helpful insight into the process from the borrower’s perspective.
The mortgage refinance process
The time it takes different lenders to move through the refinance process from beginning to end may vary; however, the steps involved are the same. Here are the stages you’ll progress through as you refinance your home to get a better deal:
Step 1: Figure out what your home is worth
Beeston says there is some legwork to do before you bother reaching out to a mortgage lender. The first step to take is to determine whether you have enough equity to refinance your home — or any equity at all.
Start by looking at the values of homes in your immediate area, taking special care to check values on properties comparable to your own. If property values have gone down since you purchased your home, you may not have any equity that would make a refinance possible. If values have risen, on the other hand, you may be in good shape.
Either way, Beeston says you should do the research ahead of time. Some lenders might have you pay for an appraisal for your home, only to find out it’s worth less than you think, making it a no-go for a refinance. You typically need at least 5 percent equity in your home to qualify for a refinance, notes Beeston. However, most lenders prefer 20 percent equity or more.
Step 2: Research loan options and check interest rates
The next step is to research available loan options. Do you want to refinance into a new, fixed, 30-year mortgage or a 15-year? Are you thinking of securing an adjustable-rate mortgage to score a lower interest rate? Plus, what interest rate will you likely pay?
Beeston says you should research lenders, then speak with several on the same day within a four-hour window. Since mortgage rates can change daily, you wouldn’t want to get quotes from different lenders on different days, she says. If you spread your research out over several weeks or months, you won’t be getting a true comparison. You can use LendingTree to see and compare potential refinance offers.
Step 3: Read lender reviews
If you haven’t checked out lender reviews already, you should take the steps to do so now.
“Third-party reviews can be incredibly helpful, especially when they are reviews of the original originator they’re working with,” says Beeston. “If you see a lot of great reviews, that’s usually a good sign.”
Also, consider asking neighbors or family about their recent mortgage experiences and who they might recommend.
Step 4: Research fees and additional costs
Refinancing your home isn’t free — even if you ultimately save money over the long haul, says Beeston. Generally speaking, you could pay an origination fee for your new loan, along with other fees. These include recording fees, government taxes, initial escrow deposits for homeowners insurance and property taxes, credit report fees, title fees, and points, which you can pay for in exchange for a lower interest rate on your mortgage.
Ask lenders about their fees so you can compare. Also be aware that while some lenders may offer to refinance with no fees, they generally do so at the expense of a higher interest rate. “Make sure to compare apples to apples” so you have a real loan comparison to consider, says Beeston.
Step 5: Gather required documentation
The documentation you need for a refinance may vary, but you will typically need one month of pay stubs; two years of W-2s and federal tax returns; two months of bank statements; a copy of your homeowners insurance policy and a recent mortgage statement for the property, at the very least. You will also need a list of all your debts and their amounts, including car loans, personal loans, and student loan debt. Finally, you’ll want to have proof of any supplemental income you have if you plan to use it to qualify for your refinance.
However, new technology has made it so you may not even need physical copies of some of the required paperwork. Instead of pay stubs and bank statements, for example, mortgage companies may let you submit your bank login information instead.
Step 6: Apply for a loan
The next step is selecting a lender and applying for a loan. Fortunately, you can complete the bulk of the mortgage refinance application online these days.
Make sure you have all the paperwork you’ll need handy as you work through the loan application process. Also, make sure you submit accurate information — errors can slow down the refinance process, Beeston says.
Step 7: Receive a loan estimate
Your lender will give you a loan estimate that lists the total costs of your loan along with other details, such as your new monthly payment and money needed at closing. You’ll also receive all loan disclosures at this time.
You should receive this estimate from your lender within three days of submitting your loan application, notes the Consumer Financial Protection Bureau (CFPB).
Step 8: Loan processing
The loan processing stage gives the mortgage company time to inspect and record all of the documents you’ve submitted with your loan application.
Step 9: Get a home appraisal
Once your refinance is processing, many lenders will set up an appraisal of your home to verify it is worth enough to qualify for a new home loan. However, Beeston notes that Fannie Mae and Freddie Mac have streamlined the process so much that you don’t always need an appraisal.
Their new technology provides automated comparisons that can gauge the risk of offering you a new loan and help you qualify for an “appraisal waiver,” she says. In that case, you won’t have to endure or pay for an appraisal.
If you do need an appraisal, however, your mortgage lender will set it up for you. Once the appraisal is completed, both you and your lender will receive a copy that includes an estimate of your home’s value.
Step 10: Underwriting
During the next step of the process, mortgage company employees known as underwriters go through all the paperwork involved in the refinance to make sure it makes sense and matches up in their system. “The underwriter checks all the paperwork that supports the loan,” says Beeston. “Their job is to make sure everything entered into the system is accurate.” However, some lenders also automated underwriting engines to speed up the process, relying on people only when follow-up or additional information is needed.
During this part of the process, you may receive questions or requests for additional information as well.
Step 11: Lock your rate
Beeston says this step is tricky because you can actually “lock in” your interest rate during any step of the process, including the first day you contact a loan officer.
“I would lock your rate at least six days prior to close,” she says. “But, some people like to gamble to see if the rate goes down.”
Step 12: Sign loan documents and close your loan
The next step of the process is the final one — loan closing. At this point, you will go into a title and escrow office, or a notary from the mortgage company will come to your home. You’ll need to sign all the final loan documents for your refinance. Once all of the documents are signed, your new home loan will be official.
5 ways you can speed up your refinance
If you are in a hurry to get your refinance behind you, there are several steps you can take to speed things up on your end:
- Choose a lender that offers speedy refinances. Beeston says that some mortgage lenders are a lot faster than others, which is why you should ask their average refinance timeline before you get started. Choose a lender that says they can close in 30 days and be wary of any lender who says it will be closer to 90 days from start to finish. “It shouldn’t take that long, but some lenders always drag it out,” she says.
- Gather all the paperwork you need to refinance before you begin the process. Remember that you’ll need pay stubs for at least one month, information on your debts, recent bank statements, two years of tax returns, and proof of supplemental income to start the refinance process. If you have this information gathered early on, you won’t have to spend time hunting it down later.
- Respond quickly to questions and inquiries. No matter how diligently you gathered paperwork before your refinance began, it’s possible your loan officer or the mortgage underwriter will have questions. They may need updated pay stubs or newer bank statements than the ones you submitted, or they may just need to verify information on your loan application. Either way, you should respond as quickly as you can if you hope to not delay the refinance process. “The biggest delays I see during refinancing happen when we’re waiting for documentation from the client,” says Beeston.
- Sign disclosures as soon as you receive them. You will likely need to sign multiple disclosures during the refinance process, notes Beeston. Typically, these will be sent to you via email with the option to sign and return the documents digitally. If you receive a disclosure via email, take the time to read it and sign within 24 hours.
- Use a closing checklist to stay organized. A closing checklist can also help you stay on track as you move through the refinancing process. The closing checklist from the Consumer Financial Protection Bureau is ideal for helping you gather the right documents at the right time, remember to ask the right questions and avoid bumps that could slow down the refinance process.
The bottom line
The time it takes to refinance your home really depends, but there are steps you can take to move the process along. Most important, you should gather all the required documents you’ll need as early as you can, be prepared to answer questions and retrieve more documentation, and stand by to resolve any issues that crop up along the way.
Still, try not to rush the process too much, particularly while you are researching lenders. Make sure to read lender reviews so you can choose a quality lender and a loan with the best terms you can find.