Refinance loans make it possible for homeowners to lower their mortgage interest rates, consolidate other debts or get cash out of their equity to pay for other endeavors. Because each homeowner has a different financial situation, you can't place an exact time frame on the refinance process. The process requires many different parties to work together from start to finish, creating many variables. However, you can save time by being organized and communicating often with your lender.
When you find the right lender, contact them to get a loan application. Most lenders use the Uniform Residential Loan Application. You probably used this when you applied for the original mortgage as well. Fill it out completely and answer the questions honestly. You need to have your financial documents, such as tax returns and pay stubs, ready to answer some questions. You'll also need to provide copies to the lender to verify the information you provided, so being prepared up front will save time. Your credit history is also collected at this time. The lender typically does this step for you, but you pay the fee in the closing costs.
For conventional mortgage loan refinancing, the lender will require an appraisal of your home to verify the market value. Lenders use local independent appraisers to complete the work. If you live in a larger area, it might take some time for an available slot to open with an appraiser. This can slow down the total time it takes you to refinance. However, the appraised value is usually valid for a few months after it's completed in case you run into any other roadblocks.
Once all of the preliminary information is collected for the application and appraisal, the loan package moves on to the underwriting phase. Although loan officers reviewed the information manually, the underwriting process uses computer software to assess the information and what type of risk you pose as a borrower. The underwriting phase will determine the final approval decision. The lender might determine that you are approved with certain conditions. Generally the conditions include submitting additional paperwork or adding specific coverage to your homeowner's insurance. You will need to meet the conditions before a closing date can be set.
After the lender approves the loan and you've met any conditions, if necessary, the loan is marked clear to close. At this time, the lender prepares all of the loan documents and sets a convenient date for closing. A refinance loan closing is very similar to the closing you attended for the original mortgage loan. As long as there are no errors or mistakes in this step, the refinance process is complete.
- The Federal Reserve Board: A Consumer's Guide to Mortgage Refinancings
- Mortgage Refinancing Quotes: How Long Does It Take Before The Process of Refinancing is Complete?
- Bankrate.com: 5 Refi Blunders To Avoid
- My Fico: Organize Your Home Mortgage Loan Paperwork
- Rates Are Hot: How to Understand the Mortgage Underwriting Process