By Erik Martin
June 17, 2020
Mortgage interest rates remain near record lows, so now may be an opportune time to refinance and save big on interest. The recent high demand for mortgages and disruptions from the pandemic are prompting borrowers to ask: How long will the mortgage refinance process take?
How long it takes to refinance a mortgage
The time it takes to refinance a mortgage always depends on several moving parts, such as credit checks, appraisals and your lender’s capacity to handle loans. This process normally takes as few as 15 days but possibly as long as 45 days or more, with an average of 30 days to complete.
“Be prepared for possibly longer processing times,” says Baruch Silvermann, CEO/founder of The Smart Investor in Los Angeles. “At the start of the pandemic, the time drastically increased due to changes in credit requirements as well as uncertainty regarding the new situation. Thankfully, the time it takes to complete a refinance has gone down, but it may still take you a little longer than before.”
Steps to refinancing a mortgage
The refinancing process hasn’t changed much, but there have been a few tweaks made since the coronavirus hit, say the experts.
Michael Oursler, chief operating officer with NewDay USA, a Fulton, Maryland-based lender serving veterans, explains that the traditional steps required to refinance your mortgage still apply:
- Shop around for lenders
Compare rates, terms and requirements carefully, then contact the lender and request a refinance. A lending representative may gather your information over the phone or electronically and instruct you on how to officially apply.
- Complete an application form
Note that many brick-and-mortar banks remain closed or have limited hours, so applications will likely need to be completed online whether you opt for a bank with a physical branch or an online lender.
- Await processing and underwriting
The lender and its underwriting team will analyze and verify the information you provided and assess your creditworthiness. If they determine you are a good candidate, your loan will be approved.
- Close on the new loan
Execute your closing documents, typically in the office of a title company or attorney, or remotely from your car or other location with COVID-19 safeguards in place.
One step that has either been eliminated or altered is the lender’s requirement to have your home appraised by a professional.
“Due to the pandemic, many lenders are waiving property inspections, which saves consumers time and money,” says Jared Maxwell, direct sales division leader for Embrace Home Loans in Middletown, Rhode Island.
In other cases, appraisers are conducting their home tours remotely by videoconferencing with homeowners.
Thanks to technology, the whole process has become more streamlined. By introducing digital signatures, using e-notaries and even eliminating the need to upload documents (some lenders let you connect your accounts to their system, allowing them to pull the information they need), borrowers should be able to close on a refinance faster than you may expect, says John Sweeney, head of wealth and asset management at Figure Technologies.
Refinance application requirements
The more prepared you are, the quicker the process will likely go. That means reviewing and collecting important documents to meet standard refinance application requirements. These include:
- Proof of income, such as recent pay stubs, tax returns from the last two years and tax forms (1099s, W-2s and others)
- Credit information, including your credit score (your bank or credit card may provide this for no charge) and three credit reports (available for free at annualcreditreport.com)
- Proof of assets, including two consecutive recent statements from savings, checking, investment and/or retirement accounts as well as an updated balance sheet of your combined assets or a cash flow summary
- Statement of debts, including documents that reflect the money you owe for your current mortgage, credit cards, student loans, auto loans and/or home equity loans
- Proof of insurance, including homeowners insurance and title insurance
Consider that you might have to request copies of these documents, such as your tax returns or pay stubs, which could take the IRS, your accountant, bank or employer extra time to retrieve and then send to you. Be sure to factor this variable into your timeline if you don’t already have these documents on hand.
Refinance appraisal requirements
Unless your lender waives its home appraisal requirement, you’ll likely need to get a fresh home appraisal. Appraisals can cost as little as $300 and as much as $800 or more, depending on where you live and the scope of the property. If your home has been appraised within the last 120 days, your lender might not require a new appraisal. This will save you both time and money.
Additionally, you may want to lock in your rate for your refinance. Rate locks guarantee a specific interest rate for a set period. You’ll want to make sure you close on your loan before the lock expires so you get the rate you were after. Some lenders are offering rate locks for periods longer than the typical 30 to 60 days — possibly up to 90 days or longer — for no extra charge.
What questions are on a mortgage refinance application?
Applying for a mortgage refinance is just like applying for a new loan. The lender will verify your income and employment information, as well as check your credit score and (usually) request a home appraisal. The interest rate you qualify for will largely depend on your credit profile (FICO score and debt-to-income ratio).
What may be different nowadays is the kind of questions you’re asked during the application.
“You may be asked more invasive questions about your income, employment status, current assets, existing debts, tax returns, debt-to-income ratio and more,” says Silvermann.
Ralph DiBugnara, president of New York City-headquartered Home Qualified, a digital resource for buyers, sellers and Realtors, agrees.
“The questions on a mortgage refinance application that are more common and prevalent today relate to job status and payment history,” explains DiBugnara. “Unfortunately, those who are recently unemployed due to the pandemic will not qualify for a refinance. And those who are furloughed can be approved but will not be able to close until they are actively back to work.”
You’ll likely be asked if you’ve missed mortgage payments and entered into forbearance with your current lender. If the answer is yes, you should still be able to refinance, “but only after providing a specific history of what caused the missed payments as well as a letter from their current mortgage servicer saying the forbearance has ended or will end,” DiBugnara adds.
Before you begin the refinance process, make sure your credit score and debt levels are in the optimum range to qualify for the best rate possible. Fine-tuning your credit profile can add a couple of months or more to your timeline, but it’s worth it if you want to maximize your savings.