The average time to close a refinance is now 59 days, up from 45 days this time last year. That's a 31% increase. The stats comes from the latest Origination Insight Report from ICE Mortgage Technology, formerly Ellie Mae.¹ Blame the soaring popularity of refinance mortgages and the limitations many lenders are still experiencing from the coronavirus pandemic, such as reduced staff and disrupted workflows.
Longer closing times aren't discouraging homeowners though. According to the ICE survey, the percentage of closed loans that were refinances jumped 7% in January 2021 compared to the month prior, the biggest leap since last spring. Refinances accounted for 67% of all loans.Get Free Quotes
What takes so long? A lot of the processing time for a home loan is taken up by underwriting. Lenders need time to verify your assets, check your tax returns and credit reports, and comb through a lot of the same documentation you provided when you prequalified for the loan, this time with a laser-focus to determine your creditworthiness.
Unlike the application process, during which you might have been in regular contact with a loan officer through each stage, underwriting happens behind closed doors. They might contact you to request another document or two, but normally you hear nothing. You just wait.
Waiting weeks for your refi to close and the lower payment to start can be a drag, especially if you've already taken a few weeks to decide whether refinancing is right for you and another few weeks getting your home appraised and making any necessary repairs. Here are three ways you can make the whole process go smoother and faster for yourself and the lender.
3 Ways You Can Speed Up Your Mortgage Refi
The best ways to shorten the refi process for yourself are to remove as many question marks and speedbumps for the lender as you can anticipate. This starts with your paperwork.
1. Prepare Your Documents
Your chosen lender will give you forms to fill out and a checklist of documents to gather. The documents you need for a refinance include:
- Paystubs from the past three months
- Tax returns and W-2s or 1099s
- Statements of outstanding debt
- Statement of assets
Underwriting is not automated—it's a person scrutinizing your paperwork, with a professional reputation at stake. Underwriters are notoriously cautious. Their decisions can be audited, and if they have approved too many questionable loans their job is at risk. Therefore, they err on the side of caution, taking more time and asking for more documents.
You can make an underwriter's job easier by providing all the required documents, not skipping one or two and hoping they aren't missed. Taking shortcuts with your documentation in the hopes of closing faster will backfire—you may have to restart the process.
Time to close all loans holds steady in January
The average time to close all loans held steady at 58 days in both December and January. The average time to close a refinance also held at 59 days month over month.
—ICE Mortgage Technology
2. Schedule Your Home Appraisal Pronto
As you prepare your documents and paperwork, schedule an appointment with a home appraiser. The earlier the better because every appraiser's time is stretched thin nowadays. Refinances are hugely popular, and every refinance must include an appraisal.
Walking through and around your house, an appraiser will assess the value of the property based on such factors as location, age, amenities, condition, and recent sales of similar homes in the neighborhood. He or she will sketch the layout of the home and take pictures.
An appraiser also looks for safety code violations, and the lender probably won't approve your loan unless you fix them. Getting the appraisal done early not only speeds up your refinance wait time but also buys you more time to fix any problems.
Realtor.com says that to be safe, you should make sure the person doing your appraisal is certified and works with multiple lenders. "If the appraiser only works with one other lender, he may have outside interests—and you may not receive a correct assessment."
3. Don't Rock Your Financial Boat
Now is not the time to change jobs or take on large debts. Having provided a great deal of paperwork to prove your creditworthiness, you don't want to render that proof obsolete. A big change in your finances could mean filing new paperwork.
You may be excited by lower loan payments on the horizon, but be patient. Don't sign a new car lease or buy a vacation home while your refi is being processed. Keep your finances steady. Try to do nothing that would lower your credit score. If a lender sees rocky financial decisions from you in the two months of the closing process, he or she could feel qualms about approving you for a 15- or 20-year loan.
- Refinance underwriting currently takes two months on average.
- Don't leave holes in the required documentation or you'll just have to fill them later.
- Keep your finances steady during the process.
- Compare great quotes tailored for you at Lendgo.