The short answer: Generally, mortgage refinancing takes about 30 to 45 days, but that number can vary based on different factors.
“During the process, most people get delayed because they do not know what is needed, and they are not prepared before they apply to a lender,” says James Orlando, vice president at Brooklyn MLS, a real estate platform in New York.
To help you avoid any holdups, here’s what you need to know about how refinancing works and the refinance process timeline:
- Qualifications To Refinance
- The Refinance Process Timeline
- Tips for Speeding Up the Refinance Process
- The Bottom Line: How Long Does It Take To Refinance a Home?
Qualifications To Refinance
When you applied for your current mortgage, you had to meet certain eligibility requirements. This also is true when you refinance, so it’s a good idea to review your finances before getting started.
Your lender will examine your credit history to determine how likely you are to repay a loan. Remember, just because you were approved for your original mortgage doesn’t mean you automatically will be approved for a refinance. If your credit score has decreased substantially, it could jeopardize your eligibility.
You typically need a credit score of 620 or higher to refinance a conventional loan. The credit requirements for government-backed loans vary depending on the program and the lender. Some require a credit score of 580 or higher, while others have no minimum at all.
While you’ve been paying off your current mortgage, you’ve been building equity. To calculate equity, take the current market value of the property and subtract the amount still owed.
Lenders prefer that you have at least 20% equity to refinance. If you have less than 20% equity but very good credit, it’s still possible to refinance. However, you’ll likely have to pay a higher interest rate and fees — and you’ll continue paying private mortgage insurance.
Your debt-to-income ratio is another indicator that lenders use to assess whether you can afford your new monthly payment. Calculate DTI by adding up your monthly debt payments — include your mortgage, credit card debt, and any car loan or student loan payments — and dividing the total by your gross monthly income.
In most cases, lenders require a DTI of 43% or lower to refinance. If your DTI is higher, you may want to pay down some debts before refinancing.
The Refinance Process Timeline
Refinancing can seem overwhelming, so familiarizing yourself with the process will make it more manageable. Here are the key steps in the timeline.
Before you start: Determine your reasons to refinance
There are many reasons to refinance your mortgage. However, it’s a process that costs time and money, so be clear about why you’re doing it. Here are some common reasons for refinancing:
- Get a lower interest rate. Interest rates change over time, which means rates now may be lower than when you got your original mortgage.
- Lower your monthly payment. If money is tight and you need to lower your monthly mortgage payment, then refinancing could help ease the pressure.
- Repay your loan sooner. If you’re earning more money than when you bought your home, and you can afford higher monthly payments, refinancing could help you pay back your loan more quickly.
- Take cash out. If you’re qualified, you could tap into your equity with a cash-out refinance. This lets you borrow your equity and repay it as part of your new mortgage. Most homeowners use the cash to retire debts or pay for renovations that improve the value of their home.
- Switch to a fixed-rate mortgage. If you have an adjustable-rate mortgage, your interest rate could go up. Refinancing to a fixed-rate mortgage locks in your rate for the life of the loan.
- Your credit has improved. If your credit score has gone up since you bought your home, you could be eligible to refinance at a lower interest rate.
Week 1: Find a lender
You could refinance your mortgage with the same lender, but this isn’t your only option. If you’ve had problems with your current lender, refinancing is an opportunity to find a better fit. It’s also worthwhile to compare different lenders to be sure you’re getting the best deal.
Tip: Make sure the lender is reputable
Your mortgage might be your biggest financial commitment, so you don’t want to be tied to a lender that you aren’t happy with. Before you decide to refinance your mortgage, do research to confirm that the lender is reliable and gets good reviews.
Week 2: Choose a loan that fits your financial needs
The main reason to refinance is to save money by replacing your existing mortgage with a new loan that has more-favorable terms. Here are some factors to consider:
- Loan term. Refinancing to shorten your term means you’ll pay off your loan more quickly and pay less in total interest. A shorter loan term likely also means a higher monthly payment. If you’re refinancing to reduce your monthly payment, then your loan term could be extended, which means you’ll pay more in total interest.
- Loan type. A fixed-rate mortgage means your interest rate is set and never changes, while an adjustable-rate mortgage means that your rate can change based on market conditions. Borrowers seeking predictable monthly payments could refinance from an ARM to a fixed-rate mortgage. Other borrowers could switch to an ARM if they want to take advantage of lower interest rates should they drop in the future, and if they can afford a jump in their monthly payments.
- Interest rate. If interest rates have dropped since you bought your home, then it might be a good time to refinance. If interest rates have increased, then you need to weigh whether your new loan will save you money in other ways.
Tip: Check for hidden or additional fees
Before you can begin saving money, you must pay for your refinance via closing costs. Some of these fees will look familiar from the first time you took out a mortgage, including the application and appraisal fees. However, if you’re working with a new lender, be sure to confirm what closing costs you need to pay to avoid any unexpected charges.
Week 3: Gather necessary documentation
Refinancing requires you to provide documents that show you can pay back the loan. Preparing these documents in advance could speed up the refinancing process and help it go more smoothly. While the list of required documents varies by lender, here’s what you will most likely need:
- Recent pay stubs.
- Two recent W-2s or 1099s.
- Two recent tax returns and W-9s.
- Two recent checking account statements.
- Two recent savings account statements.
- Retirement account statements.
- Investment statements.
- Debt statements, including auto and student loans and credit cards.
- Your homeowners insurance policy.
Week 4: Get ready for the appraisal
To refinance a conventional loan, you need to get the home appraised. During the appraisal, a licensed third party will inspect the home to determine its market value, comparing it to similar properties in the area. The results will help determine how much the lender is willing to let you borrow.
The appraisal also will determine how much equity you have, so if you’ve renovated or otherwise improved the value of your home, you’ll find out how much your equity has increased.
An appraisal might not be required to refinance an FHA, VA, or USDA home loan.
Tips to improve your home appraisal
Here are some things you can do to improve your home appraisal.
- Document improvements and renovations. If you’ve done renovations to modernize your home, upgraded your kitchen, or updated the appliances, provide receipts as proof.
- Research your appraiser. Make sure the appraiser is licensed and experienced with similar homes in your area.
- Improve your curb appeal. Slap a fresh coat of paint on your house, cut the lawn, and trim the trees or bushes. Fixing features that are broken, repairing any nonfunctional systems, and addressing any obvious eyesores are ways to boost your home’s appraised value.
- Research similar properties in the area. The appraisal will be affected by the value of nearby comparable homes. Look into how much homes of a similar size, style, and age in your neighborhood have sold for. This could give you a ballpark range of what to expect from the appraisal.
Weeks 5 and 6: Wait for your loan to get approved
Next comes the underwriting process, where the lender reviews your finances to confirm that you can afford the new loan. The underwriter will document and verify your income, the value of your assets and what debts you owe. Expect underwriting to take a few weeks. This process may take longer if your financial situation is complicated.
Week 7: Close your loan
The good news is that closing a refinance usually goes more quickly than closing a home purchase. Several days before closing, you’ll receive a closing disclosure that outlines all the final costs for your new loan. On closing day, you’ll review the terms of the loan, pay the closing costs, and finalize the paperwork. Once you’ve signed on all the dotted lines, you’ll officially have refinanced your mortgage.
Tips for Speeding Up the Refinance Process
While you can’t control your lender’s process or timeline, there are ways that you can help avoid delays. Here are a few pointers that could help your refinance go more smoothly:
- Gather documents before applying. “The easiest ways to speed up the refinancing process are to gather together all your necessary information,” Orlando says. This could include pay stubs, bank statements, investment account statements, W-2 forms, and tax returns.
- Avoid opening new credit lines. Applying for new accounts can ding your credit score, which in turn could get in the way of you receiving the best possible interest rate.
- Don’t take on new debt. Adding debt to existing credit lines also can hurt your credit score and DTI ratio, which affect the interest rates offered by lenders.
- Review your credit. “It is important to be able to define and explain any potential negative items on the credit report to the lender upfront,” Orlando says. “This can be ordered online, and it usually takes about one (or) two days.”
The Bottom Line: How Long Does It Take To Refinance a Home?
The exact timeline for refinancing a home varies depending on your lender and your financial situation. Familiarizing yourself with the process and gathering the necessary documents in advance help ensure the process goes as smoothly and efficiently as possible.