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.
Key Takeaways:
- Before you can refinance, check your finances to ensure you have a solid credit score, a low DTI ratio, and enough equity to refinance.
- It typically takes 30 to 45 days to refinance a mortgage, but the timeline can be affected by factors such as a low appraisal, or how quickly your lender can underwrite your loan application.
- Understanding how the process works and preparing the necessary documents in advance can help your refinance go smoothly.
Preparing To Refinance
When you applied for your current mortgage, you had to meet specific eligibility requirements. This also is true when you refinance, so it’s a good idea to review your finances before getting started.
Credit score
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 mortgage lender. Some require a credit score of 580 or higher, while others have no minimum.
Home equity
Lenders prefer that you have at least 20% home 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 continue paying private mortgage insurance.
Debt-to-income ratio
Lenders usually require a DTI ratio of 43% or lower to refinance. If your DTI ratio is higher, you may want to pay down some debts before refinancing. Our DTI ratio calculator can help you figure out your numbers.
The Refinance Process Timeline
Refinancing can seem overwhelming, so figuring out your reasons for refinancing and familiarizing yourself with the process will make it more manageable. Here are the key steps in the timeline.
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 choose a lender that’s 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 you aren’t happy with. Before you decide to refinance your mortgage, do some research to confirm that the lender is reliable and gets good reviews.
Week 2: Choose a loan type
The main reason to refinance is to save money by replacing your existing mortgage with a new loan that has more favorable terms. There are many types of loans and refinances to consider.
Factors to consider when deciding on a loan type include:
- 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.
- Interest-rate type. Borrowers seeking predictable monthly payments could refinance from an adjustable-rate mortgage to a fixed-rate mortgage. Others may switch to an ARM to take advantage of lower interest rates, though a rate increase also will increase your monthly payment.
- Closing costs: You will have to pay closing costs, which total on average $5,000 for a mortgage refinance.
Tip: Check for hidden or additional fees
Refinancing isn’t free — 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 home appraisal fees. However, if you’re working with a new lender, confirm the closing costs you need to pay to avoid ‘hidden’ costs or unexpected charges.
Week 3: Apply with the necessary documents and review your loan estimate
Refinancing requires you to document your finances and show you can pay back the loan. Preparing these documents in advance could speed up the refinancing process and help it go more smoothly. Three days after you apply, you’ll receive the loan estimate. This three-page form details the loan your lender has approved you for, including your estimated interest rate, monthly payment, closing costs, taxes, and insurance. All lenders use the same loan estimate form, making it easy to compare mortgage offers from multiple lenders.
Week 4: Get ready for the appraisal
With a conventional loan, you need a refinance appraisal to determine your home’s market value. The results will determine how much the lender will let you borrow and how much equity you have. 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 made home improvements that increase the value of your home, such as upgrading the kitchen or updating 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. Addressing obvious eyesores is an easy way to boost your home’s appraised value.
- Research similar properties in the area. Find out how much similar homes in your neighborhood have sold for. This will give you a ballpark range of what to expect from the appraisal.
Week 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. Expect underwriting to take a few weeks. This process may take longer if your financial situation is complicated.
Week 7: Close your loan
At least three business 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 — once you’ve signed on all the dotted lines — officially refinance 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.
- Gather your documents in advance. 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 temporarily reduce your credit score, which in turn could get in the way of you getting 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 affects the interest rates offered by lenders.
- Review your credit. Order or review online your credit report and alert the reporting bureau to any errors. “It is important to be able to define and explain any potential negative items on the credit report to the lender upfront,” Orlando says.
- Apply for an appraisal waiver. If you’re refinancing with a conventional loan, Fannie Mae and Freddie Mac offer appraisal waivers that allow you to skip the appraisal. To be eligible, you’ll need to have built enough equity without tapping into it.
- Explore streamlined refinances. You may be able to skip the appraisal if you have a government-backed loan. FHA, VA, and USDA loans offer streamlined refinance options, though the exact eligibility requirements vary based on loan type.
- Communicate with your lender. One of the easiest ways to help move along the refinance process is to be responsive and communicative with the lender.
- Be ready to explain blemishes in your credit. If your credit isn’t perfect, you may need to explain certain flaws in your financial history.
- Make sure your home complies with regulations. Make sure your home meets the lender’s eligibility criteria for a refinance.
- Document any home improvements. If you’ve improved your home to boost its value, and you want to tap into your equity, it helps to document what you’ve done for the lender and appraiser.
Factors That Affect the Refinance Timeline
Here are some factors outside your control that can affect how long it takes to finalize your refinance.
A low home appraisal
If the home appraisal comes in lower than expected, it can delay your refinance closing. If you decide you want to dispute the appraisal, this can cause the process to take longer.
How busy your lender is
Certain market conditions can also affect how long your refinance takes. If interest rates have recently dropped and your lender has been inundated with refinance requests, that can slow down how long it takes to refinance your mortgage.
Third-party services
Any third-party service needed for your refinance could potentially slow down the process. This includes home appraisers, inspectors, and credit bureaus that disclose your credit report to your lender.
FAQ: How Long Does It Take To Refinance a House?
Here are answers to common questions about how long it takes to refinance a mortgage.
You can expect to receive the funds from your cash-out refinance three to five days after closing.
There is no limit to the number of times you can refinance your mortgage — just make sure it will be worthwhile when you weigh the new terms and closing costs.
The timeline for a streamlined refinance will depend on the lender and the rules set by the government agency that backs the loan. However, you can typically expect a streamlined refinance to take about a month or less.
The Bottom Line on How Long It Takes To Refinance a House
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 can help make the process go by as smoothly and as efficiently as possible.
