Perhaps interest rates have dropped enough to pull the trigger. Maybe you want to tap your equity to fund a major home remodel.Or shorten your mortgage term and save thousands on interest. Or pay down that outstanding high-interest credit card debt. Whatever the reason, refinancing your mortgage can make good sense under the right circumstances.
But that begs an important question: How long does it take to refinance a house? For answers, including the expected timeline and steps involved, read on.
Mortgage Refinancing Steps and Timeline
The typical timeline for completing a mortgage refinance is usually between 30 and 45 days.
“However, this can vary depending on several factors, including the lender’s efficiency, the borrower’s responsiveness and the complexity of the loan,” explains Dennis Shirshikov, a finance professor at City University of New York Queens College. “In some cases, refinances can be completed in as little as 15 days, while others may stretch out to 60 days or more if issues arise.”
Michael Raffa, a branch manager and vice president at the Middletown, Rhode Island, office of Embrace Home Loans, says in his experience the refinancing process is usually completed within 25 to 30 days. But this timeframe could be shorter or longer, often based on factors outside the borrower’s control, “including demand for third-party services such as appraisers and title and closing companies,” he says.
Completing a mortgage refinance will involve several key steps. Here’s a breakdown of what to expect and how long each step could take.
Step 1: Find a Lender
It’s smart to gather and compare refinance loan offers from several lenders so you can make a more informed decision and choose the best deal.
“Someone seeking a refinance can spend a few days shopping for a lender as they evaluate terms, products, process and confidence in the person that will be guiding them through the transaction,” says Raffa, who adds that this step can often take three to five days.
Of course, your timeline could vary depending on how many lenders you want to compare.
Step 2: Apply for a Loan
Once you’ve picked a lender, you can formally complete and submit a refinance loan application form. This can be done online, in person or over the phone, depending on what the lender allows.
Prepare to provide documents verifying your employment, income, credit, and financial status, including W-2s, bank statements, recent pay stubs, your most recent mortgage statement, and if self-employed, a profit/loss statement and tax returns. Your lender will check your credit with your permission and may ask for additional documents.
The loan application “typically takes about one to three days to complete, depending on the complexity of your financial situation and how quickly you gathered the necessary documentation,” Shirshikov notes. Some lenders indicate that document collection and processing alone can take up to seven days.
According to Debra Dobbs, a Chicago-based real estate broker with Compass, applying for the loan can be done in as quickly as one hour under optimal circumstances and “if you have the paperwork organized,” she says.
Step 3: Sign Disclosures
Your lender has three business days after you submit your loan application to disclose the terms of the loan program. These disclosure statements indicate estimated costs, your annual percentage rate and your payment schedule.
You can electronically sign the paperwork the same day you receive it from the lender.
Step 4: Lock in an Interest Rate
Interest rates can go up or down between the time you apply for your refinance loan and the closing date. It can be smart to lock in a desirable current rate with your lender. As long as you close your loan before your rate lock expires, your rate won’t change. Rate lock periods range from seven days to 180 or more. Longer lock periods come at a cost, however, so you won’t want to lock in for more time than you need. A rate lock can be accomplished relatively quickly — often in a matter of minutes. You’ll be required to lock in a rate before you final closing documents can be drawn.
Step 5: Get a Home Appraisal
Your lender will likely require an appraisal by a professional to determine your home’s market value. If you’re refinancing just to change your interest rate or loan term, you could qualify for a no-appraisal option like the FHA Streamline, VA IRRRL, or USDA Streamline so long as your current loan is FHA, VA or USDA.
“Once the appraisal is ordered, it takes about 72 hours for the appointment to be scheduled and four to seven days for the report to be delivered to the lender after the inspection is done,” adds Raffa.
The appraisal visit itself can be completed in half an hour to a few hours.
Step 6: Fulfill Underwriter Requests
As you await loan approval, the underwriter may request additional documentation or clarification on certain points. This process can add another three to seven days to your timeline.
“It depends on how busy the lender is and how complex the credit file is,” says Bruce Ailion, a Realtor and real estate attorney in Alpharetta, Georgia. He adds that this step will not occur “until all the verifications are completed and the appraisal is in.”
Step 7: Close on the Refinance Loan
Once the lender approves your loan, you’ll need to set a closing date. Three days before your scheduled closing, you’ll receive a closing disclosure that outlines the final terms of your refinanced loan and the agreed-upon closing costs. This document details your loan terms, estimated payments, actual fees, and other costs and credits.
On the closing date, you will review and sign the final documents, which can take up to a few hour. You’ll review several key documents: the closing disclosure, which details the final costs and terms of your loan; the promissory note, in which you agree to repay the loan under specific terms; the deed of trust, which outlines your rights as a borrower and the lender’s right to foreclose if you default; and affidavits, which confirm that all the information you’ve provided is accurate.
“After signing, there is a three-day waiting period,” better known as the right of rescission, says Shirshikov, “during which you can cancel the refinance if you change your mind.”
After the rescission period ends, your refinance loan will be fully funded within one to five days.
Lastly, the new mortgage will be recorded with your county, which can take one to three days.
Common Delays in Mortgage Refinancing
The mortgage refinancing process doesn’t always go as smoothly as planned. Snags and unforeseen circumstances can slow up the works. Here’s a rundown of possible pitfalls.
Appraisal Problems
Appraisal issues are common during refinancing, “especially if the home’s value doesn’t meet the lender’s expectations — leading to a reevaluation of the loan terms,” Shirshikov says.
Raffa agrees. “The appraiser could note the current condition of the property is subject to repairs to be completed before a final approval is issued,” he says.
Incomplete/Insufficient Documentation
The lender or underwriter may request additional information or clarification.
“A client may be slow in executing and returning their initial disclosure package or provide incomplete documentation, such as not providing all the pages of their bank statements or tax returns,” cautions Raffa.
Not Fulfilling Underwriting Requests
Not responding promptly or fully to underwriter requests could further prolong the process.
“That’s why having all your documentation ready when you apply is critical, including tax returns, pay stubs, bank statements and any other financial information the lender might require,” Shirshikov says.
Title and Insurance Issues
Title issues can develop between the date you took out your original mortgage and the time you decide to refinance, often due to factors like delinquent property taxes, new easements or encroachments, unpaid contractor liens, child support liens, overdue HOA fees, clerical mistakes, home title fraud, identity theft, or undiscovered heir claims.
How to Speed Up Your Mortgage Refinance
Ailion says you can accelerate the mortgage refinance process and avoid setbacks by following best practices. This includes having all documents and information ready at the time you apply, being honest about your financial status and debts on your loan application, and responding to any lender inquiries promptly.
Also, when it comes to the appraisal inspection, “it’s important that the house is presented well and that any repairs or items that need attention are taken care of before the inspection,” Raffa recommends.
Additionally, “maintaining clear communication with your lender and asking questions about anything unclear can ensure the process moves smoothly,” says Shirshikov.
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How Long Does it Take to Refinance a House? originally appeared on usnews.com
