Even though refinancing is faster today than this time last year, removing roadblocks in the process can make it go smoother. The average time to close a home refinance is now only 43 days, down from a pandemic high of 59. That's a 37% decrease. The stats comes from the latest publicly available Origination Insight Report from ICE Mortgage Technology, formerly Ellie Mae.¹ We can thank the decrease on the waning effects of lockdowns and staff shortages; also, higher interest rates are bringing out fewer borrowers.
Longer closing times were hardly discouraging homeowners though. According to the ICE survey for last year, 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.
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.
“Taking shortcuts with your documentation in the hopes of closing faster will backfire.”
Waiting weeks for your refi to close and the lower payment to start can be a drag, especially if you have 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.
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 about six weeks.
- Rate Simple has one of the smoothest refi closing processes in the industry.
- Keep your finances steady during the process.
- Don't leave holes in the required documentation or you will just have to fill them later.