How long does it take to refinance a mortgage?
You may be new to the refinancing process for your existing mortgage, or maybe you have been doing a little research before submitting your loan application.
No matter the reason for your visit, here you find out, “how long does it take to refinance a mortgage?”.
The answer is not as simple as you may like to hear, but Ellie Mae (One of the Largest Mortgage App Processors) is showing an average time of 59 business days (as of 2022) to close on your refinance loan.
However, there are lots of things you can do to speed up the refinancing process.
The Refinancing Process (Step-by-Step Explained):
1) Initial Application and Proposal (Talk with a Loan Officer)
Filling out the bank or credit union’s application process
If this process goes well you go into the Documentation Collection & Loan Verification step.
Things You Should Consider: Does a Cash-out Refi or Term Refinance make more sense?
Things to ask yourself (What are your goals: do you want to lower your monthly mortgage, do you want to refinance and consolidate all your debt, credit cards go on vacation, do home improvement, etc?..). This will help your loan advisor know if a cash-out refi makes sense or if a rate and term refinance works better for you.
Typically within 1 Day or 2, your loan advisor should be able to run your price out your loan, run your credit and find out what interest rates you may be able to be approved for.
If you don’t know an estimate of your home the loan officer can help you calculate your home equity.
(For Example, if your loan balance is $250k and your home is worth 350k..you would roughly have $52K in your home’s equity… assuming that you can get an 85% loan to value.)
Should you go with a Conventional Loan or an FHA loans?
(FHA Loans will require you to have private mortgage insurance).
2) Document Collection/Loan Qualification
(Will Require proof of income ie. Tax Returns, Bank Statements, Recent Pay Stubs, Property Taxes, Additional documentation as needed.)
If all the questions are answered and your documentation looks good you will move on to the next step getting your Pre-Qualification letter.
3) Getting Pre-Qualified
They pull your credit report
(on average your credit score is 750+ you’ll get a lower interest rate). If your score is lower than 750 you are likely to have a higher interest rate but paying down some of your debt can lower your DTI (debt to income ratio).
You’ll eSigning your Application & Running through your Federal Disclosures. If all is good then you go on to Loan Processing.
4) Loan Processing: Appraisal, Title Search, Verifications
In this stage, your mortgage lender will order your Home Appraisal and layout any appraisal requirements, and in the background start your title search to make sure there are no outstanding liens on the home. Next, they will verify your employment both with written and verbal confirmation.
5) Preliminary Underwriting Approval
In this stage, your underwriter will look over all the details that were submitted and double-check they are accurate and are indeed approved for the loan.
6) Final Underwriting Approval/Clear To Close
This is the last step where the underwriter will make sure there are no documents needed from you and go through all the documents submitted with a fine tooth to ensure your funding.
7) Closing Disclosure Preparation & Approval
Now you’ll get to choose a closing date and get to ask any questions as you go through the final closing of the documents. In the documents, you will have all the loan details down to the penny on closing costs, monthly payments, interest amortization, and so on.
Next (Things You Have Control Over & Things You Don’t Control)
These next few parts help slow or speed up the process…
Things You control:
1) You choose to get your loan…Finding the Right Mortgage Lender (here are some things to consider).
Large Banks and Credit Unions have a longer time to process because they do a lot of other types of loans like car loans, student loans, lines of credit, and so on… which slows down their process of your loan and won’t have the staff to accommodate your loan.
**Hint use a Mortgage Broker (as they only specialize in mortgages and have a quicker process than Large Banks like “Wells Fargo, Chase, etc” and Credit Unions.
2) You can control how fast you get back the documentation they need to underwrite the loan (i.e, be prepared with all required docs, like your w2, bank statements, property taxes, insurance, and so on). When a new document is requested try to get back to them asap, I would suggest within 24 to 48 hrs to keep the process moving along.
**Hint ask for a list of documents they need from you and push them back as soon as possible. Don’t be the bottleneck on this one, as this is the most common thing people drag their feet on that makes the timeline get even further out.
3) Making sure they can do E-signing of documents, instead of Wet signing them all can help speed up the process and make any amends that may come up easy to put through the process.
4) Communication (between you and the loan advisor or processor) can make a big difference in the timeline of your closing.
Things You Don’t Control:
1) Loan Volume (How many people are refinancing at the same time you are).
**Hint if you use the form above it will connect you with a Mortgage Lender who only does mortgages, which helps speed up things.
2) Interest Rates (Whether they are going up or down)
3) Economic Environment Situations (like the Covid-19)
4) Home Appraisal (if required) you may be able to shave off a week if you have had an appraisal done within a year.. its called a
PIW (Property Inspection Waiver) but most likely the mortgage lender will order a new one. If you don’t have enough equity in your home (meaning less than 5% or none), I would check out our post on FMERR, as there are still government programs available to help homeowners out.
5) Title Search can take 1 – 2 weeks since this is a manual process and doesn’t have the technology to speed things up.
6) TRID rules – 3 Business Days waiting period prior to closing for you to receive the final numbers in writing (aka Closing Disclosure).
7) Right of Recision on Primary Property – Adds 3 Days to the end of the process before funds are disbursed.
If all this seems overwhelming (which it is) I would suggest you fill out our quick 60-second quiz that will help connect you with mortgage lenders that can help explain your refinance options at no cost to you.