Mortgage Refinancing 101: Expert Answers to Your Top Questions

• Lower Interest Rates: If current market rates are at least half a percentage point lower than your existing rate, refinancing can reduce your monthly payments and save money over the loan’s lifespan. Some lenders provide no or low-cost refinance options to their current mortgage holders
• Switching Loan Types: Moving from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage offers payment stability, protecting you from potential rate increases in the future.
• Accessing Home Equity: Refinancing allows you to tap into your home’s equity to invest in high-performing assets or finance significant home improvement projects.

A proficient lender can complete a mortgage refinance in 14 to 30 days. The timeline depends on the lender’s efficiency and your preparedness.

The refinancing process involves several key steps:

• Shopping for a Lender: With a good real estate broker or if your previous lender maintains contact, this can take just a few hours.
• Applying for the Loan: If you have your paperwork organized, this step takes about 1 hour.
• Signing Disclosures: Allocating 1 hour should suffice for reviewing and signing disclosures.
• Supplying Required Documentation: This can take from 1 hour to several days, depending on your organization. Essential documents include tax returns, bank statements, W-2s/1099s, and your current insurance policy.
• Getting a Home Appraisal: The lender orders the appraisal. Typically, the appraiser visits within 3-5 days and submits the report within 2-3 days after the visit. Your real estate broker can assist with the process.
• Meeting Underwriter Conditions: The time varies based on the conditions and how quickly you can provide additional information.
• Reviewing and Signing Final Documents: This step usually takes half a day.
• Right of Rescission: There’s a mandatory 3-day waiting period after signing the final documents during which you can cancel the refinance.
• Funding: The loan funds on the day of closing.
• Recording: This occurs at the refinance closing.
• Receiving Cash (if applicable): If it’s a cash-out refinance, you’ll receive the funds at closing.

• Appraisal Problems: If the property doesn’t appraise at the required value, it can hinder the loan amount you desire. Attending the appraisal and providing the appraiser with comparable sales data can help ensure a favorable valuation. Or ask your real estate agent to handle the appraisal for you.
• Incomplete Documentation: Delays can range from a day to several days, depending on how quickly you provide missing documents.
• Underwriting Requests: While title and insurance issues are typically resolved early, unexpected underwriting conditions can cause delays if not promptly addressed.
• Other Factors: A lower-than-expected credit score can affect your interest rate or loan approval. Working with your lender or broker to improve your credit can help overcome this hurdle.

• Good Credit: A high credit score qualifies you for better interest rates.
• Stable Income: Demonstrates the ability to repay the loan comfortably.
• Significant Equity: Allows you to leverage your home’s value for investments or large expenses. For example, if your investment account yields a 7% return and the refinance rate is 6%, refinancing to invest the equity could be beneficial.

• Credit Score: A score of 725 or above is desirable for good rates. A score of 780+ is considered excellent and can secure the best rates.
• Debt-to-Income Ratio (DTI): Lenders prefer a DTI of 42% or less, with 36% or below being optimal for favorable terms.
• Equity and Relationship Factors: Having substantial home equity and a good relationship with your bank can also positively influence your refinancing options.