Michelle Giorlando6-minute read
UPDATED: April 06, 2023
Refinancing your mortgage to a new loan is a great way to lower your monthly payment, lower the mortgage term or take cash out of your home’s equity for renovations or other expenses.
But how long does it take to refinance a house? The answer depends on several factors. We’ll look at how long it generally takes, what the timeline looks like and how to prepare for your refinance to speed up the process.
In general, you can expect a refinance to take 30 – 45 days. That’s an average; the timeline can vary widely depending on factors such as your state’s laws, any closing and insurance requirements, and third-party timelines for appraisals and title issues.
The refinance process timeline is made up of four major steps: initial approval, appraisal, underwriting and closing. Much like fingerprints, everyone’s refinance will be a little different!
There are several different types of refinances available. Because some are more complicated, they may take longer to reach closing. Also keep in mind that unique homes may cause appraisal delays and other closing day delays.
However, the main points of the timeline are the same for nearly all refinances. Let’s look at the average number of days each step might take. Remember that some of these steps may take longer than average, depend on the home and where it’s located. Some of these steps can also happen at the same time.
It’s also worth noting that, if you’re leaving all the equity in your home, the process may move more quickly. This can happen if you’re refinancing to a lower interest rate or converting an FHA loan into a conventional to eliminate your mortgage insurance premium (MIP). If you’re refinancing to take cash out of your home, your process may take longer.
The process of applying for a refinance is very similar to a purchase. You’ll submit your paperwork to prove your income history, credit score, assets and employment. This initial approval takes a few days, depending on how quickly you get your info in.
A refinance home appraisal can be less complex than a purchase loan appraisal. Sometimes it consists of an appraiser visiting the home in person, driving by to assess the property or performing a desktop appraisal by looking at property records and comparable properties online.
While 7 – 14 days is average, this step can take a few days up to a few weeks. It’ll depend on the loan type and factors like the housing market conditions.
During underwriting, your lender works with third parties to confirm all your details and to underwrite your loan. They may need to confirm loan and property details, title, employment and insurance. They do this by reviewing documents you provide and through other research. Any delays by you or the third parties can lead to this step taking a few weeks.
When underwriting is complete and all your details are confirmed, you’ll be cleared to close. You’ll receive your closing disclosure and closing date.
At closing, your old mortgage will be paid off, and you’ll replace it with a new mortgage. You have a 3-day grace period to change your mind, called your right of recission. If you’re refinancing to get cash out, you’ll receive your money after the right of recission period ends.
Gathering the information you’ll need beforehand can expedite the refinance process and help make it as efficient as possible.
All refinances require that you submit paperwork. These pieces of information are used to help you qualify for the loan.
Here’s what you can expect to submit:
If you’re self-employed, you’ll provide additional documentation to prove your income. This will generally consist of your last two federal income tax returns and profit-and-loss statements from your business.
Before you apply for your refinance, it’s a good idea to look at your credit report to see if there are any errors. Errors in your credit report can lower your credit score and show up as a red flag to lenders.
If you do find an error, contact the credit bureau your report was from and start a dispute claim. You’ll need to provide documentation to prove your case. The dispute process can take about a month, so it’s good to correct any errors immediately.
You’ll also want to keep an eye on your credit score. This number is used to determine what kind of refinance loan you’ll qualify for, as well as your interest rate. Typically, the higher your credit score, the lower your rate. Lenders want to make sure you can keep up with payments and not utilize all your credit.
If your credit score is low, you can raise it in several ways:
Your DTI is the percentage of your monthly income that you spend on paying off debt. Lenders look at your DTI to make sure you can afford your new mortgage payments and to make sure you’re not taking on more debt than you can pay. In general, lenders like a DTI of 50% or less, but different loans have different DTI requirements.
Let’s look at how to calculate your DTI and see an example calculation.
First, you’ll need to add up the minimum monthly payments you’re required to make for these types of debts. These may include:
Next, divide that total number by your gross monthly income. This is your income before taxes are taken out. If someone else will be on the loan with you, such as your spouse or partner, their gross monthly income should be added to yours before dividing. The number you get from this calculation will be a decimal.
Finally, convert that number to a percentage. To do this, multiply that decimal by 100 to get your DTI percentage.
Here’s an example of this calculation:
1. Add monthly minimum payments:
a.Current mortgage: $800
b. Student loan: $150
c. Your car loan: $175
d. Partner’s car loan: $150
e. Credit card: $100
Total = $1,375
2. Divide by your monthly gross income:
a. Your gross income plus your partner’s gross income = $6,000
b. $1,375 divided by $6,000 = 22916
3. Convert to a percentage:
a. 22916 multiplied by 100 = 22.9%
So, in this example, your DTI would be 22.9%.
To lower your DTI, you’ll have to either decrease your debts or increase your income.
Typically, your closing costs will be about 2% – 6% of the loan amount. This varies depending on the loan type and if you roll the closing costs into your principal loan balance. Closing costs are generally made up of fees for the appraisal, application and title services.
A lien is a legal claim on a property; if a debt isn’t repaid, a lender can take the property. Having a lien against the title of your property can create problems for your refinance. Because a property lien is tied to a property and not the property’s owner, you’re responsible for taking care of the lien even if you didn’t incur the expense.
If you have a lien on your title, you’ll have to clear it before you’ll be able to close on your refinance. To remove the lien, you’ll need to either pay the debt in full or settle the debt by agreeing on a partial payment or a payment plan. If the debt was paid off but the lien still shows, contact the lien holder to have it removed. You’ll need documentation to prove that it’s paid.
While some refinance loans don’t require a full onsite appraisal, it may be required. If your loan requires an onsite inspection, it’s a good idea to consider decluttering and cleaning your home beforehand to present it in the most positive light.
A cash-out refinance can take longer to get to closing because you’re borrowing against your equity, which may require a stricter appraisal. This can push the timeline out several more days. Also, when you close on a cash-out refinance, you’ll have to wait at least 3 days after closing to get your money. Expect a cash-out refinance to take closer to 45 days and possibly longer.
While there are a few factors that could delay your refinance, in general, you can expect to finish the process in about 4 – 6 weeks. If you’re ready to take the next step toward refinancing, apply online today.
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A cash-in refinance gives homeowners a chance to put more money down than they were able to the first time. Learn why a cash-in refinance may be right for you.
Homeowners can use a refinance to pay off high-interest debt. Learn about the pros and cons of refinancing your house to pay off debt and if it’s right for you.