How Long Does It Take To Refinance A House?
February 22, 2024 8-minute read
Author: Victoria Araj
Understanding the refinancing process, the average timeline and what to expect as you close can make a refinance a little easier.
Let’s walk through the basics of most refinances and a few tips you can use to close faster. We’ll also help you decide whether you’ve hit on the right time to refinance your home.
How Long Does A Refinance Take?
A refinance takes 30 to 45 days to complete in most cases, but it could always require more or less time depending on a variety of factors. For example, appraisals, inspections and other services that third parties handle can slow down the process. Your finances and property size can also impact the timing of a refinance.
A brief word on the finer points of a refinance: When you refinance your mortgage, you replace your current loan with a different one. Your new mortgage will have different terms from your current loan, at least in some cases.
A refinance may change your interest rate, term length, monthly payment and more. The funds from your refinance pay off your original mortgage after your closing. Then, you make payments on your new loan.
Keep in mind that a mortgage refinance might also affect your credit score. You may have 14 to 45 days to apply for a refinance before a hard inquiry appears on your credit report.
This number can vary depending on which formula the credit bureau uses. It’s a good idea to only apply within a month of your first mortgage application if you’re shopping to get the best interest rate possible and minimize the impact your score has on your loan.
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When To Refinance A Mortgage
There are a few major reasons why you might want to refinance your mortgage, and we’ll consider these next.
Change Your Loan Terms Or Interest Rate
If today’s rates are lower than your current interest rate or if you’re struggling to make your monthly mortgage payments, you may want to consider a rate-and-term refinance. With a rate-and-term refinance, your principal balance remains the same. However, your interest rate or monthly payment changes. You can refinance your loan into a longer term if you want to lower your payments or a shorter term if you want to pay off your loan faster.
You can also consider a no cash-out refinance. This allows you to refinance for less than or equal to your remaining balance. If you put more money toward your balance while refinancing, it’s referred to as a cash-in refinance.
Switch To A Different Type Of Financing
A refinance can also allow you to switch from one type of loan to another. Let’s say you bought your home with an adjustable-rate mortgage (ARM) and the rate will adjust soon. To avoid the change in your mortgage rate, you could refinance your house to a fixed-rate loan. This way, you may have a more consistent monthly payment.
The same can be said for government-backed loans. If you want, you could refinance your VA or FHA loan to a conventional mortgage.
Get Cash Out
If you’ve owned your home for a few years, you could use a cash-out refinance to pay for a major purchase or investment. Every month you make a payment toward your loan balance, you build equity in your property. Equity is the value of your home minus the amount you still owe on your principal mortgage balance.
You accept a higher loan principal and take the remainder away in cash when you take a cash-out refinance. You can use these funds for almost anything, from home repairs to paying off credit card debt.
Ways To Speed Up The Refinance Timeline
You can take various steps to shorten the refinance process. Here they are.
Make Sure You Qualify
You should have a clear picture of what you want out of your refinance before you apply. Do you want to change your term? Lower your interest rate? Convert your existing equity to cash?
First, establish a financial goal before you start comparing mortgage lenders. This step will allow you to quickly see if you qualify for a refinance with each lender on your list.
Factors that lenders consider when you apply for a refinance include:
- Your credit score: Just like when you apply to buy a home, you must meet credit standards before you can refinance your loan. Check your credit score and make sure you have a FICO® Score of at least 620 to refinance into a conventional loan. If your credit score is lower, learn more about refinancing with bad credit.
- Your home equity: Your home equity is particularly important if you want to take a cash-out refinance. Most lenders won’t loan you more than 80% – 90% of the equity you own. This restriction means you can only refinance $8,000 to $9,000 for every $10,000 of equity you have in your property. Contact your current lender or loan officer and request a mortgage statement if you aren’t sure how much equity you have.
- Your debt-to-income ratio (DTI): Your DTI is the percentage of your monthly gross income you use to make monthly debt payments. You can calculate your DTI by dividing all your monthly debts by your total monthly income. Most lenders like to work with borrowers who have a DTI of 43% or lower. To qualify for as many options as possible, you may want to reduce your other debts before refinancing if your DTI is above 43%.
Remember, going through a refinance means you must pay closing costs again. Keep in mind that you may lose any financial benefit you’d get with a refinance if you bought your home within the last year. If you’re a Rocket Mortgage® client, we’ll periodically do a mortgage review to make sure your current mortgage is the one that best supports your goals.
Prepare Your Documents Ahead Of Time
Your lender will ask you for a number of documents when you apply for a refinance. These documents help your lender verify your income, assets and financial history. Get your documents ready ahead of time to ensure a smoother process.
Some of the documents your lender might ask you for include:
- Your two most recent W-2s or 1099s
- Your two most recent pay stubs
- Your two most recent bank statements from each of your accounts
- Your two most recent tax returns
Is anyone else applying for a refinance on your loan (like a spouse)? Your lender will also ask to see their documentation.
Are you self-employed? Your lender may want to see more documentation to prove that your income is what you say it is. Prepare by keeping a copy of your most recent tax return somewhere accessible.
Your lender may ask for any other documentation during the refinance underwriting process. Be sure to respond quickly to keep everything moving along on schedule.
Get Ready For Your Appraisal
Your new lender usually requires a home appraisal when you refinance. Just like when you went through the home buying process, a refinance appraisal tells the lender they’re not loaning you more than the value of your home. However, if you have an FHA, VA or USDA loan, your lender may waive the appraisal so you can move forward with a no-appraisal refinance.
Ideally, your appraisal will come back for more money than you paid for your home. If your assessment comes back low, you may need to adjust the amount you’re asking for in your refinance.
It’s never too early to begin setting yourself up for a successful appraisal. Here are a few actions you can take during the early stages of your refinance to ensure your appraisal comes back strong:
- Do your research. Local property values influence the amount your property is worth. Do some research and see how home values are trending in your area. Does recent sales data show that local property values have increased? You may want to keep this information handy for the day of your appraisal.
- Keep upgrade documents in order. Permanent upgrades you make to your home increase its overall value. Keep receipts, contracts and permits handy so you have proof of any updates you’ve made to your home since you moved in. This information gives your appraiser a more accurate estimate of your home’s value.
- Spruce up your exterior. Your home’s curb appeal can play a role in its value. Take some time to touch up your yard in the weeks before your refinance. Mow your lawn, consider planting a garden and power wash the sides of your house. Be present when the appraiser walks through your home. Point out any special features and be sure to do some light cleaning the morning they arrive.
Meet the requirements and ready to refinance?
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Should You Refinance Right Now?
Now that you know how to refinance your loan, the next step is to decide if it’s the right time to submit your application. Here are a few worthwhile considerations before you apply for a refinance.
Current Market Interest Rates
You can often save money by refinancing if interest rates are lower now than when you got your loan. Compare your current APR with market rates to see if you’re overpaying for your loan.
You may be able to save even more if your credit score has gone up since you first got your mortgage. If you’re not sure how rates in your area have trended, contact a local real estate professional or a Home Loan Expert.
Your Home Equity
You need to already have enough equity in your home to cover your expenses if you want to take a cash-out refinance. You might not have enough equity to qualify if you’ve only been living in your home for a few years.
A cash-out refinance isn’t a revolving line of credit. Once you use what you borrow, you can’t get any more money unless you refinance again. It’s important to know exactly how much cash you need to cover your upcoming expenses, so check to see if you have enough equity to cover it in full. However, the advantage is you can get a lower rate on a cash-out refinance than you can on a home equity line of credit. This is because you’re replacing your primary mortgage rather than taking out a second one.
How Long You Want To Stay In Your Home
Remember, you must pay closing costs when you refinance – just like you did when you bought your home. The specific closing costs you’ll pay depend on where you live. You can generally expect the total expense to equal around 3% – 6% of your total loan amount.
Only want to stay in your home for a few more years? You might lose money when you refinance. Do the math and check your loan estimate to see if refinancing makes sense for your situation.
FAQs: How Long Does It Take To Refinance A Mortgage?
Here are a few common questions that people ask about how long it takes to refinance a house.
How soon can I refinance my house?
How soon you can refinance your house depends on your lender’s requirements, the type of mortgage you have and the type of refinance you want. Some lenders may require you to wait until you make a certain number of consecutive mortgage payments.
Can I refinance my mortgage with no closing costs?
You usually can’t avoid closing costs when you refinance your mortgage. However, you may be able to avoid paying them up front. Instead, you could see if you can roll your closing costs into your loan balance.
How long does funding take after closing refinance?
The Truth in Lending Act (TILA) requires a 3-day grace period after a loan closes for you to cancel the refinance. Once the grace period ends, lenders usually provide funds within 3 to 5 business days.
The Bottom Line: How Long A Refinance Takes To Close Depends On Your Situation
You can refinance your mortgage loan to get a lower interest rate, change your term, consolidate debt or take cash out of your equity. There’s no exact time limit on how long a refinance can take. However, most refinances close within 30 to 45 days of applying for the refinance loan.
While lots of refinancing tips can help the refinance process go smoothly, you can take a few steps on your own to speed up the process. First, make sure you qualify before you submit a refinance loan application. Then, while your lender reviews your application, gather all the necessary paperwork and prepare for your appraisal.
Don’t forget to review your personal goals, interest rate and home equity to make sure it’s the right time to take this step. It’s best to speak with a licensed financial expert or advisor before making any major financial decision.
Once you’re ready, you can start the refinance process online with Rocket Mortgage.
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