Mortgage

How lengthy will it take to refinance a house in 2021?

How long does the refinancing take?

On average, it takes anywhere from 35 to 45 days to refinance a home from start to finish.

A month or more may sound like a painfully long time to refinance. But don't panic – a lot of it is turnaround time that leaves your refi papers out of sight and out of mind.

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

Prepare for success by learning the steps required, preparing your paperwork in advance, and starting the refinancing process with a low mortgage rate in hand.

Start Your Mortgage Refinance (October 31, 2021)

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> Related: The best way to refinance your mortgage

The refinancing time can be deceptive

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

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

Much of the refinancing process takes place behind the scenes. So all you have to do is keep an eye out for any updates or changes your lender may need.

However, if your lender requests any 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 a leading cause of refinancing delays.

Start Your Mortgage Refinance (October 31, 2021)

Steps To Refinance Your Home

To help you understand how the refinancing process works – and to save you some time – here are some of the most important parts of the refinancing process.

Define Your Financial Goals Make sure a refinance is the right move

1. Define your financial goals

The first step in refinancing is figuring out your financial goals. You need to ask yourself exactly what you want to achieve and how refinancing will help you with that.

You can opt for a refinance if you're trying to lower your total monthly debt, free up extra cash for home renovations, or free up part of your home for a big purchase.

Others could refinance to stop paying mortgage insurance once they reach 20 percent equity, or switch from a floating rate mortgage to a fixed rate mortgage and set a lower rate.

By refinancing your mortgage in today's low interest rate environment, you could cut your monthly payments significantly and potentially transform your entire financial portfolio.

Use our refinancing calculator to see how much you could save

2. Make sure refinancing is the right move

Before you commit to refinancing your home, ask yourself if you really want to refinance.

For the most part, if it can save you money, you should probably refinance at today's extremely low rates.

However, there are situations in which refinancing does not make sense. For example, if you have many years in your repayment term, starting over at 30 or even 15 years can increase your total interest payments enough to offset the monthly savings you would see.

Be sure to speak to a loan officer, financial planner, or money-savvy friend before attempting a refinance if you are unsure whether it will help you.

When your financial goals are aligned with your refinancing strategy, the overall process becomes much smoother. You won't waste time tackling issues that could have been avoided with a little more planning in advance.

3. Compare lenders and find the right refinance program

You will likely save money refinancing your mortgage – but it is usually not free. Closing costs from lenders and debt financing fees can affect your bottom line. This is why it is so important to compare lenders.

The average closing cost of a refinancing can be 2-5 percent or more of the loan amount. So, if you want to quickly get back the money you spent on closing costs, consider comparing what lenders charge for mortgage refinancing.

For example, some lenders today offer zero-closing-cost mortgages. For a slightly higher interest rate, lenders will credit all of the mortgage costs at the closing table. You have to shop around to find a lender with no closing down.

Finding the right refinancing program is just as important as finding the right lender. Fortunately, you have several refinancing options to choose from:

Conventional Mortgage RefinancingFHA Streamline RefinancingVA Streamline / IRRRL (Interest Reduction Loans) FHA Cash-Out RefinancingVA Cash-Out RefinancingUSDA Streamline RefinanceHome Equity Loans / Home Equity Lines of Credit

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

4th Prepare your documents before you apply

Whether you're applying for a purchase loan or refinancing an existing mortgage, there's a lot of paperwork involved – one of the main reasons mortgage approvals are delayed.

Here are some ways to keep your refinancing from stalling due to paperwork issues:

First, collect income and tax records. Don't wait for the lender to ask for proof of income.

If you are an employee, prepare at least two years W-2 and your final payroll if you are a wage earner. When you receive income from commissions, make sure to report it to the lender if it doesn't appear on your pay slipIf you are self employed, you need the tax returns for the last two years. Prepare your last bank statements, investment accounts, savings accounts or retirement accounts to check your assets or income from self-employmentWhen you receive income on which taxes are not deducted from your wages – such as working for a contract company – you need a 1099. submitIf you receive income from a pension, a disability pension from the VA or social insurance, you must present your award letter. You must also provide proof if you receive money from child support or maintenance paymentsIf you generate income from rental properties, you must report this income (regardless of whether it is positive or negative rental income)

You should also prepare your debts. You must report any debt that is not available on your credit report (other than phone bills or utility bills). Child support, child support payments, or debt settlement with private individuals are examples of things that may not appear on your report.

Finally, prepare other different papers. If you are divorced, you will need to provide a copy of the decree. If you are separated, you must notify the lender and state the purpose of the refinancing.

Download our interactive refinancing checklist

5. Prepare for the assessment – if you need one

There are times when you don't need an appraisal to refinance your home.

Fannie Mae and Freddie Mac begin easing their refinancing rating requirements. Some loans that are supported by the FHA, VA, and USDA do not require a rating. In some cases, all you need is an automated valuation to estimate the value of your home.

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

Estimates determine the value of your home, and the value of your home can have a huge impact on your refinance.

For example, if your estimated value is low, it can affect your equity – and whether or not you need to pay for personal mortgage insurance (less than 20% equity can trigger a PMI request).

So, you want your home to look its best on the day of the valuation. Start preparing for the day by catching up on some gardening work or doing some simple household chores – like repainting a room.

You should also walk through your house and make sure the lights, toilets, sinks, and doors are working properly. Look for any obvious water leaks from your plumbing or roof. If you discover a problem, have it repaired or replaced well in advance of the valuation date.

Opportunities to speed up the refinancing process

The best way to speed up the refinancing process is to do your due diligence before submitting an application.

Aside from finding lenders and preparing your paperwork before applying, there are other types of research you can do to prepare you. For example:

Check your balance

Check your FICO credit score and sign up. Knowing your score before you start applying will help you understand what mortgages are available to you.

In the mortgage business, a credit rating difference of one point can have a huge impact on your interest rate. If you look at Fannie Mae's price matrix for all eligible mortgages, you'll find that the difference between a credit score of 679 instead of 680 can result in you paying a 0.50% higher interest rate.

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

Half a percent might not seem like a lot, but on a home loan, it can result in you paying hundreds of dollars in mortgage payments every month.

You should also fix any errors on your report before applying. One mistake can have a significant impact on your score – and your interest rate.

Also, don't apply for new lines of credit until you've refinanced your mortgage.

Applying for a new loan during the process will reduce your credit score, which could affect the status of your mortgage approval. The best way to apply for a new loan is to wait for your loan to expire.

Avoid large purchases

Buying an expensive item during the refinancing process could increase your debt-to-income ratio and potentially lower your credit score.

One of your refinancing goals should be to get to the closing table as soon as possible. With that in mind, it is always best to keep your financial house stable to avoid potential uncertainty with lenders.

Your next steps

It takes about a month to refinance, so the best way to get things going is to get the ball rolling as soon as possible.

Start by looking for a low interest rate to see how much you can save by refinancing.

Confirm your new plan (October 31, 2021)

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