If you own a home, you’ve probably heard or seen a lot of buzz around refinancing in recent months, and you’re not alone. Many homeowners are anxious to take advantage of market trends like low interest rates and high property values—two key factors in optimizing any loan—but what does the refinancing process look like and how long does it take?
Ultimately, when you refinance, you’re exchanging your original mortgage for a new one. Ideally the new mortgage will lock in more favorable loan terms or help you secure some kind of financial benefit, such as reducing the amount of your monthly payments, changing the type of loan you currently have, getting rid of private mortgage insurance (PMI), or borrowing cash against your home equity. In the process, the original purchase mortgage gets paid off and is entirely replaced by the refinanced mortgage.
Sounds easy enough, right? It’s actually not a completely simple switcheroo. In fact, refinancing involves many of the same steps as getting a purchase mortgage and can take 5–7 weeks to complete with most traditional lenders. Although some lenders have closing times in as little as 30 days and we find the best options available for all our clients. Here’s our breakdown of what you can expect when refinancing with Qualified Home Loans from start to finish.
Before you can refinance your mortgage, you’ll need to get pre-approved to understand what types of loans and interest rates are available to you. We’ll review your financial history during pre-approval, including debt, credit score, and income. You will need to provide some basic information about your property, income/assets, and current loan, including the estimated value of your mortgage and reason for refinancing. After you apply, our system evaluates this snapshot of your financial profile and instantly determines if you’re pre-approved. Having the following information handy when you apply will help kick-start the pre-approval process:
- Home information (address and property type)
- Income details (type and amount)
- Title holder information (name and email address)
- Current mortgage information (estimated value, confirm lien holder)
- Asset information (retirement, bank account, etc.)
- Reason for refinancing
Choosing your loan
Once you’ve been pre-approved, you’ll be able to see different rate and loan options that are available to you. We’ll help you compare mortgage options until we find a few that are best tailored to your goals: whether that’s getting a cash-out refi, swapping from an adjustable to fixed rate mortgage, or just lowering your interest rate. Comparing different loans will help you decide which rate to lock by giving you a sense of how different terms will impact your monthly payments and how many payments it will take before you offset the cost of the refi. Having a pre-approval helps define a path into the refinancing journey with confidence and start exploring mortgages that are compatible with your financial goals.
Locking in your rate
A rate-lock is when your lender agrees to honor a particular interest rate by “locking” it into your loan—usually for 30-60 days, or long enough to complete the underwriting process. After you get pre-approved, you’ll be able to review Loan Estimates, which contain the breakdown of costs and fees associated with different mortgage terms and interest rates. Because they have the exact same formatting from one lender to the next, Loan Estimates are one of the best comparison tools in the mortgage shopping process. Use your Loan Estimate to examine the details of any refinance mortgage, including key elements like loan term (15-year or 30-year?), loan type (conventional or FHA?), loan amount, and estimated monthly payment. Once you figure out the best loan option for you, it’s time to lock your rate by putting money toward an appraisal.
Until this point, your rate and loan amount have been based on the estimated value of your home. However, in the time that you’ve lived there, your home may have increased or decreased in fair market value. That’s why it’s important to get a new appraisal of your property, even though you likely went through this process when you originally bought your home. Our team will order the appraisal, title review, and start processing your request to lock your rate immediately.
Initial document collection and processing
During any mortgage refinance, you’ll need to gather and share various financial paperwork that helps a lender verify things like your income, employment history, and assets. Document collection and processing might seem tedious, but it helps ensure that your application complies with mortgage industry regulations and includes all the necessary components for underwriting review and approval.
Refinancing with Qualified Home Loans is simple and streamlined thanks to our fully digital approach. We help you coordinate with third parties and track conversations online; we also keep all your to-dos in one place to minimize confusion and reduce headaches. You’ll receive clear, easy-to-navigate prompts and be able to upload items like paystubs, tax returns, and bank statements to your online account. You’ll also have access to a dedicated processing expert should questions arise. Once you’ve submitted all your documents, you’ll be contacts for an initial review to determine if you are conditionally approved for the loan—a.k.a. if the initial documentation you submitted satisfies the guidelines of your particular loan.
Conditional approval and final review
Over the next week or so, we’ll begin vetting and processing your loan application with the aim of getting it conditionally approved. This indicates that your documentation and assets have been preliminarily okayed by an underwriter, but our team may still have to review a few things before we give you the final approval on your loan. It’s our job to ensure the title, appraisal, and homeowners insurance requirements are sorted and cleared. From here, our team will also do a more thorough examination of your credit history and debt-to-income (DTI) ratio to confirm there haven’t been any significant changes since you started this process. New debts can impact your DTI ratio and jeopardize your eligibility for refinance. This part of the process typically involves a bit of back-and-forth communication as additional questions come up, so be on the lookout for notifications about follow-up tasks in your account—for example, you might be asked to clarify any large, one-off transactions in your bank statements.
Clear to close
A conditional approval is just that—conditional. Nothing is set in stone until the final review, when an underwriter evaluates all the documentation in your application for the last time. If everything looks good, your refinance will be approved and designated as clear to close! This means you’re ready to pick a date, time, and location for your closing day; we’ll coordinate those details with the title company and notary, then email you when the closing day logistics are confirmed.
After final approval, you’ll also receive a Closing Disclosure (CD). This is one of the most important pieces of documentation in any lending process: similar to your Loan Estimate, it’s a standardized form containing an itemized breakdown of all the costs associated with your mortgage. Unlike a Loan Estimate, however, the CD includes specific figures. After you’ve carefully reviewed all the details, you’ll need to acknowledge your Closing Disclosure 3 business days before you’re planning to close on your new mortgage.
If you have any questions or final changes you’d like to make on the Closing Disclosure, you can use the 3-day grace period to call your loan team and have those made. No adjustment is too small— even if your name is misspelled or there’s a typo in your address, you’ll want to have that corrected before closing. We’ll send you a revised Closing Disclosure, which you should check again. Then you’ll receive your final Closing Disclosure, which you’ll sign as part of the closing process.
Just like with a purchase mortgage, a refinance is officially sealed at the closing table. A notary, title agent, and attorney (depending on state requirements) will meet at the time and place chosen by you and your loan team. There, you’ll review and sign the final closing disclosure and other closing documentation and make the payment on closing costs. Typically you’ll have the option to wire your closing costs directly to the title company or bring a cashier’s check with you. All costs and fees are included in the Closing Disclosure, so you’ll know how much cash to close is required ahead of time.
So, are you ready to refinance?
Refinancing can be a winding road, but we’re here to simplify the process. If you think you’re ready for refinance, it only takes a few minutes to get pre-approved with QHL and we’re here to answer all your questions along the way. Let’s get started to see how much your monthly savings may be. Contact us for more info.