And Can the Process be Sped Up?
From reducing monthly installments, changing the loan duration, getting much-needed cash, switching to a new loan structure, or removing insurance requirements, refinancing offers several perks.
If you're a homeowner who would like to replace your current contract with a new one for whatever reason, you may be wondering just how long the process will take. After all, you're probably eager to get started on your new contract, especially if you're securing a lower interest rate.
Here's what to expect when it comes to refinancing timelines, as well as a few tips for speeding up the process.
Typically, it takes anywhere from 30 to 50 days to close a refinance loan. An Ellie Mae Origination Insight report for August of 2020 notes that:
"The average time to close a refinance held at 50 days for the second month."1
It's important to note that 50 days is 15 days longer than it took to close a refinance loan back in March of 2020. Why the more than two-week time discrepancy? Historically low interest rates. Borrowers have been rushing to refinance, overwhelming lenders who can't keep up with the demand. The result is a longer closing period.
The amount of time it takes to close also depends on the type of loan you're choosing.
On average, it tends to take longer to close on an FHA or VA loan than a conventional refinance.
All things to keep in mind as you estimate your refinancing timeline.
5 Tips for Speeding Up the Process
Since most homeowners decide to refinance to save money, it's no wonder so many want to know how to speed the entire process up! Here are a few tips that can help you keep things moving along.
1. Know Your Goal
Before you start the process, it's vital that you know your end goal. Are you looking for cash? Do you need to switch from an adjustable-rate to a fixed one? Are you solely interested in lowering your monthly payments?
What you're looking for dictates the closing process you have. For example, if you're just lowering your interest rate and payments, an appraisal may not be necessary. Should you change your mind once you've started the refinancing process, you may have to begin all over again.
Knowing just what you're hoping to gain from the refinancing process can help your lender ensure you're being presented with options that align with your goal.
2. Explore No-Appraisal Options
If you're looking to close quickly, consider options that don't have appraisal requirements, which can take a few days - and money - off the entire endeavor. For example:
- Fannie Mae may offer an appraisal waiver, providing you have at least 10% equity
- Freddie Mac may offer the same, but you'll need at least 20% equity
- You may be eligible for an FHA streamline refinance, which doesn't require an appraisal
- You may qualify for a VA interest rate reduction refinance loan, in which no appraisal or income documentation is required
Most borrowers don't realize just how many options there are when it comes to refinancing. Knowing the types of programs you qualify for can help you more accurately estimate your closing timeline.
3. Have Documents on Standby
Believe it or not, borrowers can be the ones who hold up the closing process. Just like when you initially applied for a mortgage, there is documentation that your lender will need to verify. If you don't promptly respond to your lender's request or don't have your paperwork organized, that can push your closing date back even more.
Application mistakes are another cause for delayed processing times. Triple-check your application before submitting it, ensuring you have provided all requested information.
Before even applying for a new mortgage, get together all necessary paperwork your lender will need to review, like:
- Employer information
- Current mortgage statements
- Recent pay stubs
- Bank statements
- Homeowners insurance paperwork
This will eliminate any back and forth between you and your lender, which can help save a few days.
4. Understand the Market
Low rates mean longer waits!
If you're eager to lock in a competitive interest rate, chances are, other borrowers are just as eager! That can lead to lenders being overwhelmed with requests, which means it will take longer to close. If the rates are great, the wait is typically worth it. If, for some pressing reason, you need to close on a refinance loan as soon as possible, shop around for other lenders and be sure to inquire about their workload.
Just keep in mind, even a slightly higher interest rate could mean you owe hundreds or thousands more over the life of your loan. If you have 50+ days to wait, it's better to go with a long closing timeline and a lower interest rate than it is to close sooner on a higher interest rate. That's especially true if the whole reason why you wanted to refinance in the first place was to save money.
5. Protect Your Credit Score
Doing anything that changes your credit score means your lender will have to re-evaluate your financial standing. That's why it's imperative that while you wait to close, you don't do anything that will impact your credit score. That includes things like:
- Opening or closing credit cards
- Financing large purchases
- Adding to your debt
- Not staying current with your financial obligations
Lenders are carefully evaluating your money-management skills so that they can assess the risks that come with lending you money. If your score drops, you may suddenly seem like more of a risk, and your lender will want to verify additional documentation. That all means a drawn-out refinancing process.
Ready to Refinance? Compare Lenders Now!
Team up with Lendgo, a free-to-use online platform that makes it easy for borrowers to connect with lenders, to explore refinancing options now! Borrowers who compare lenders typically go on to save more than those who take the first offer they get, so be sure to compare before making any decisions.
In less than two months, you could have a brand new, money-saving mortgage. Get started today!