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How long does it take to refinance a house?

Larry Phillips
The Mortgage Reports contributor

Here’s how long it takes to refinance a house in 2019

On average, it takes between 35 and 45 days to refinance a house from start to finish.

That’s according to 2018 and 2019 data from Ellie Mae, a huge company that helps lenders originate mortgages.

A month or more might sound like a painfully long time to refinance. But don’t panic — much of that is just a waiting period where your refi paperwork will be out of sight, out of mind.

Still, there are steps you can take to make sure the process goes as smoothly as possible.

Set yourself up for success by learning the steps required, getting your paperwork ready in advance, and starting the refinance process with a low mortgage rate in hand.

Compare refinance rates from major lenders. Start here (Nov 22nd, 2019)

The time it takes to refinance is mostly a waiting game

It may seem like 35-45 days is a long time to wait for a mortgage refinance. Fortunately, you won’t have to spend every day during that time worrying about rates, comparing lenders or chasing down W-2s and paystubs. 

In fact, you’ll probably only spend a few days to a week of your own time preparing everything you need to refinance.

Unsigned paperwork is one of the leading causes of refinance delays.

Much of the refinance process happens “behind the scenes,” so all you really need to do is keep an eye out for any updates or changes your lender may need. 

However, if your lender does request changes or updates, make sure you respond to those requests immediately. If you need to sign any paperwork, do it right away. Unsigned paperwork is one of the leading causes of refinance delays.

Get approved sooner. Start your refinance application today (Nov 22nd, 2019)

Steps to refinance your home

To help you understand how the refinance process works — and save you some time — here are some of the most important parts of the refinance process.

  1. Define your financial goals
  2. Make sure a refinance is the right move
  3. Compare lenders and choose the right refinance program
  4. Get your paperwork ready before you apply
  5. Prepare for the appraisal — if you need one

1. Define your financial goals

The first step in a refinance is to figure out your financial goals. You have to ask yourself exactly what you want to accomplish, and how a refinance will help you get there.

You might decide to refinance if you’re trying to lower your overall monthly debt, free up additional money for home renovations, or unlock some of your home’s equity to make a large purchase. 

Others might refinance to stop paying mortgage insurance once they’ve reached 20 percent equity, or switch from an adjustable-rate mortgage to fixed-rate mortgage and lock in a lower rate. 

By refinancing your mortgage in today’s low-interest-rate environment, you could significantly lower your monthly payment and potentially change your entire financial portfolio. 

Use our refinance calculator to see how much you could save

2. Make sure a refinance is the right move

Before you commit to refinancing your home, you should ask yourself if you really want to refinance. In most cases, if it can save you money, you probably should refinance at today’s ultra-low rates.

However, there are some times when a refinance won’t make sense. If you’re many years into your loan term, for example, starting over at 30 or even 15 years might increase your total interest payments enough to counteract the monthly savings you’d see.

Be sure to talk to a loan officer, financial planner, or money-savvy friend before leaping into a refinance if you’re not sure whether it will help you.

When your financial goals are aligned with your refinance strategy, it will make the overall process a lot smoother. You won’t waste time addressing issues that could have been avoided with a little more planning beforehand.

3. Compare lenders and find the right refinance program

You will probably save money if you refinance your mortgage — but it usually isn’t free. Lender closing costs and third-party origination fees could cut into your bottom line. That’s why it’s so important to compare lenders. 

The average closing costs on a refinance can range from 2-5 percent or more of the loan amount. So, if you want to quickly recoup the money you spend on closing costs, you should compare what lenders are charging to refinance mortgages. 

For example, some lenders today now offer “zero-closing cost” mortgages. For a slightly higher interest rate, lenders will credit all the costs to originate the mortgage at the closing table. You’ll need to shop around to find a no-closing cost lender. 

It’s just as important to find the right refinance program as it is to find the right lender. Fortunately, you have several refinance options to choose from: 

  • Conventional Mortgage Refinance
  • FHA Streamline Refinance
  • VA Streamline/IRRRL (Interest-Rate Reduction Loan)
  • FHA Cash-Out Refinance
  • VA Cash-Out Refinance
  • USDA Streamline Refinance
  • Home Equity Loans / Home Equity Lines of Credit

Knowing what kind of refinance you need will make it easier to find a good lender and low rate when the time comes.

4. Get your paperwork ready before you apply

Whether you’re applying for a purchase loan or refinancing an existing mortgage, there is a lot of paperwork involved — which is one of the biggest reasons why mortgage approvals get delayed. 

Download our interactive refinance checklist

Here’s what you can do to prevent a hold up in your refinance resulting from problems with your paperwork:

Gather income and tax documents beforehand. Don’t wait for the lender to ask for proof of income. Instead, prepare at least two years W-2’s and your most recent pay stub if you’re a wage earner. If you receive income from commissions, make sure you report it to the lender if it doesn’t appear on your paystub. 

If you’re self-employed, you’ll need tax returns for the previous two years. Prepare your most recent bank statements, investment accounts, savings accounts or retirement accounts to verify your assets or self-employment income. 

If you receive income where taxes aren’t taken out of your pay — such as working for a company on a contract basis — you’ll need to provide a 1099.

If you receive income from a pension, VA disability benefits or social security benefits, you’ll need to provide your award letter. You’ll also need to provide proof if you receive money from child support or alimony payments. 

Finally, if you receive income from rental properties, you’ll need to report that income (whether it is positive or negative rental income). 

Prepare your debts. You’ll need to report any debt that’s not available on your credit report (aside from phone bills or utility bills). 

Child support, alimony payments or debt settlements with private parties are examples of what might not appear on your report. 

Prepare other miscellaneous paperwork. If you’re divorced, you’ll need to provide a copy of the decree. If you’re separated, you’ll need to notify the lender and detail the purpose of the refinance.  

5. Prepare for the appraisal — if you need one

There are circumstances where you won’t need an appraisal to refinance your house. Fannie Mae and Freddie Mac are starting to loosen their appraisal requirements on refinances. Some loans backed by the FHA, VA and USDA don’t require an appraisal. In some cases, you’ll only need an automated evaluation to estimate your home’s value. 

However, many lenders still require a full appraisal to determine the value of your home. So, you should prepare your house as if you need one.

Appraisals determine the value of your house, and your home’s value can have a big impact on your refinance. 

For instance, if your appraised value comes in low, it could affect how much equity you have —  and whether or not you’ll need to pay private mortgage insurance (less than 20 percent equity could trigger a PMI requirement). 

So, you’ll want your home looking its best come appraisal day. Start preparing for that day by catching up on some yard work or completing some easy home maintenance — like giving a room a fresh coat of paint. 

You should also walk-through your house and make sure the lights, toilets, sinks, and doors work properly. Check for any obvious water leaks from your plumbing or roof. If you do find a problem, make sure to have it repaired or replaced well-before appraisal day. 

Ways to speed up the refinance process

The best way to speed up the refinance process is to do your due diligence before you apply.

Aside from shopping around for lenders and preparing your paperwork before you apply, you can do other types of research to get you ready. For example:

Check your credit. Check your FICO credit score and report. If you know your score before you start applying, you’ll better understand what mortgages are available to you. 

In the mortgage industry, a one-point credit score difference can have a big impact on your interest rate. If you look at Fannie Mae’s pricing matrix for all eligible mortgages, you will see the difference between a credit score of 679 instead of 680 could result in you paying a 0.50% higher rate. 

Check your credit beforehand and take steps to improve it. A one-point difference in your score could potentially save you thousands on your refinance.

A half-percent may not seem like much, but on a home loan, it could result in you paying hundreds of dollars each month in mortgage payments. 

You’ll also want to fix any errors on your report before you apply. An error could have a significant impact on your score — and your interest rate. 

Don’t apply for new credit. Applying for new credit during the process will reduce your credit score, which could affect the status of your mortgage approval. It’s best to wait until your loan closes to apply for new credit. 

Avoid big-ticket purchases. Buying an expensive item during the refinance process could raise your debt-to-income ratio and potentially lower your credit score. 

One of your refinance goals should be to get to the closing table as quickly as possible. With that in mind, it’s always best to keep your financial house stable to avoid any potential lender uncertainty. 

Your next steps

Refinancing takes about a month, so the best way to speed things up is to get the ball rolling as soon as possible.

Start by finding a low rate to see how much you could save by refinancing.

Get started on your refinance application today. (Nov 22nd, 2019)