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How Long Does It Take to Refinance a House?

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Refinancing a home is very similar to getting a mortgage, but you might be wondering how long the process might take. If you have time-sensitive goals, knowing average refinance timeline for each stage could help you with planning.

How long does it take to refinance a house?

According to a recent report by Ellie Mae, the time to close on a home refinance has decreased significantly over the last few months.

As of February 2018, the average time to close on a home refinance loan was 37 days, down from 50 days in October 2016. Granted, closing times vary by loan type (i.e. FHA, conventional VA, etc.) but the average is coming down across all home refinance loans, Ellie Mae found.

Jason Lerner, area development manager and mortgage broker at George Mason Mortgage, LLC, said that refinancing could be even faster if there are no delays or complications.

There are many variables that come into play that could affect the timeline for your home refinance.

One variable in the timeline will be how responsive you, as the loan applicant, are with providing and verifying information as requested by the lender. The other variable is how responsive your lender is and whether or not there are issues or complications with your application.

The good news is that you can control your level of responsiveness and communication to help the process go as smoothly as possible while minimizing delays. However, you cannot control how the bank handles their internal processes.

That’s why it’s a good idea to review lenders who have a good track record of proving the best home refinance rates and customer service. Often, the best place to start is with your current lender, especially if you are a fan of their customer service, but always compare their offer with other lenders as well to be sure you’re getting the best deal.

The mortgage refinance process — from start to finish

It’s good to know about all the steps of the refinance process. This way, you can anticipate what’s needed and be prepared for the closing table that much quicker.

Here are the steps involved in most home refinance loans, along with how long you can expect them to take (barring delays, problems or issues). Some of these stages can overlap or occur simultaneously.

Figure out why you want to refinance

Preparing to refinance your home loan comes down to knowing your objective so you can narrow down a loan type, amount and potential repayment schedule. This is an important step.

Without being clear on exactly why you are refinancing your home, you could end up choosing a loan that doesn’t suit your needs, or even end up overextending yourself financially, which could put your home in jeopardy.

Refinancing your home just because you can is not a good idea. Create a list of financial goals, amount of money it will take to reach them along with a budget that includes your refinance scenario.

Common goals for refinancing a home could include:

  • Having a lower monthly payment
  • Consolidation of other debt
  • Get a lower interest rate
  • Pay off the loan quicker (with a shorter term, lower rate or both)

Home refinance costs (more below) should also be considered in this equation. Though the equity in your home is yours, accessing it still costs money. If possible, fare on the conservative side when it comes to determining the loan amount and type for your home refinance.

Choose the right refi loan

Now that you have an idea of what you’ll use your loan for and what you can afford, it’s time to determine the best type of home refinance loan.

There are many options when it comes to refinancing your home. You should become familiar with each so you can choose the best one for your needs.

Here are some loan types you could research:

  • 30-year fixed: A fixed interest rate loan amortized over 360 months
  • 15-year fixed: A fixed interest rate loan amortized over 180 months
  • Adjustable rate mortgage (varying types and terms): Interest rate resets periodically
  • Interest only: Borrowers pay interest on the loan, then principal
  • Payment option: Adjustable rate mortgage with multiple payment options
  • Balloon: Lower payments during loan term with a large payment at the end of the term

Next, you’ll want to explore different options offered under FHA, VA, USDA or conventional home refinance loans. There are ups and downs for each kind of mortgage, but ultimately, you need to choose the product that will help you meet your financial goals.

Compare offers from lenders

Now that you have a sense of the best type of home refinance loan, it’s time to research lenders who can offer you the best home refinance deal possible. Shopping for the best refinance rates can save you thousands of dollars, so don’t skip this step!

The terms offered will be based on a few things like how much your home is appraised for, the maximum loan-to-value a lender will offer, current market interest rates and your personal credit profile.

If you are especially concerned with how long it will take to refinance your home, you can make this a part of your research. Dan Green, former mortgage loan officer and owner of mortgage-literacy website Growella said, “Homeowners — especially homeowners working on a deadline — should ask about time-to-close as part of the lender comparison process.”

Understand the fees and additional costs

As mentioned before, financing your home is no small feat and it does come with a price tag. You should know upfront about the fees and costs related to a home refinance, as it should help you determine whether or not this is a move you actually want to make.

Think about how much you paid to close on your original mortgage loan to anticipate your closing costs this time around.

You can use a home refinance calculator so you can see the impact of refinancing your home when it comes to interest, monthly payments, tax deductions, total mortgage cost, etc.

Here are some home refinance costs you should know about:

  • Mortgage application fee
  • Home appraisal
  • Loan origination fee
  • Document preparation fee
  • Title search fee
  • Recording fee
  • Flood certification fee
  • Inspection fee
  • Attorney fee
  • Survey fee

Costs could vary by state and lender, so compare these fees on your Loan Estimate (see below) as you look at multiples lenders.

Submit your refi application to various lenders

Most lenders will allow you to apply for your home refinance online. To streamline your application process and get the best rates, you can apply to several lenders at once. This way, you can explore the best rates available while having lenders compete for your business.

If all of your refinance applications are made within a 30-day time period, the inquiries will not affect your score while you are shopping for rates.

Be prepared to provide demographic information about yourself and co-borrower, along with information about your property, original loan and more. Your lender will also eventually ask for additional proof to support the information you provide in the application. This would be a good time to start gathering this documentation up.

Get a loan estimate

Once the lender has processed your application and verified your information, they will provide what is called a Loan Estimate (LE.) By law, they must submit this loan estimate to you within three business days of receiving your completed loan application.

The Loan Estimate form is a standardized template that clearly outlines the home refinance terms the bank expects to offer you, should you decide to go forward. The bank has not yet approved (or denied) your refinance loan at this point, and they may ask you to sign the LE as a record of receipt on your end.

Again, you’ll want to use this Loan Estimate to compare multiple offers from various lenders.

Lock in your rate

Prevailing rates for mortgages can change from day to day and even from hour to hour, so it’s a good safety measure to lock in your rate. A rate lock means your lender will “lock” in your interest rate until closing.

Some lenders may lock your rate as part of issuing the Loan Estimate, but this is not always the case. You can check the top of your Loan Estimate document on the first page to find out if your interest rate is locked, along with when this rate will expire.

Submit required documents for loan processing

Among the supporting documentation you’ll be asked to provide may include:

  • Pay stubs
  • Tax returns, W-2s and/or 1099s
  • Credit report
  • Bank statements
  • Proof of any supplemental income

Note: It’s a good idea to check your credit report regularly in case there’s inaccurate information that needs to be addressed. You don’t want anything to prevent (or delay) the bank from processing your application or extending a refinance loan to you.

Once this information is provided, the processor will go on to order your credit report, home appraisal and payoff amount from current lender.

Appraisal

This is where an appraiser will come to your home and determine its value. They will be dispatched by the bank and come view the property, look up comparable properties nearby and furnish a report with their findings. The amount you’ll be able to refinance will be based on this appraisal report.

Underwriting

At this stage, the lender is putting all the pieces together — the appraised value of your home, your personal financial situation along with your predicted ability to repay the loan on time and as agreed. This risk analysis can take time and may require additional information.

You should be ready to provide additional information to your loan processor, if needed. Also, your employer could be contacted to verify your salary and employment status during the underwriting phase.

Commitment letter

This letter states that the bank agrees to lend you money, but there could be additional requirements, such as providing more information or clarifying information you’ve already provided. The bank can rescind this offer if there is an significant change in your personal financial situation as well.
However, once you meet the conditions set forth in the commitment letter, the underwriting department will issue a “clear to close.” Your loan officer will let you know via email or phone call that the bank will soon communicate the next steps for your closing date.

Closing disclosures

At least three days prior to closing, you’ll be issued a Closing Disclosure. It will outline the final terms of your refinance loan.

This three-day timeline is designed to give you enough time to compare rates and ask your lender questions about your loan. For example, if your closing disclosure varies greatly from your Loan Estimate, this is time to get clarification as to why.

You can also ask to review your closing documents before you get to the closing table. Your lender should be able to provide an electronic version so you are aware of what you would be signing at closing. The Consumer Financial Protection Bureau (CFPB) offers examples of closing forms along with instructions on how to interpret the information.

If you need help staying organized throughout this process, you can use a closing checklist to help you keep track of each stage of the closing process.

Closing

At this stage, you will sign all the required documentation to complete your home refinance. You should bring your Closing Disclosure with you to make sure your the terms you were quoted are on par with this document.

Sometimes your loan closing will be at an office with a closing agent (from a title company) that facilitates the entire process. According to Rafael Reyes, producing branch manager at loanDepot, “Most often, the lender will send either a representative from the title company or a lawyer to your home for the closing.”

He added, “The borrower doesn’t need a lawyer on their side for the closing, but they could hire legal representation at their discretion.”

At closing, you’ll sign your promissory note, mortgage, initial escrow disclosure and “right to cancel” form. You should bring proper identification because there may be a notary present who requires a valid ID to notarize your signature.

How you can speed things up

If you’re refinancing your home with the idea of saving money, you probably want to start saving sooner than later. You can start capturing those savings as soon as your refinance is complete and funds are disbursed.

To speed up the refinance process, you’ll want to stay on top of all the documentation requested by your lender. Even better — collect everything before you begin the loan application process so everything is ready, even at a moment’s notice.

You will also need to be responsive when it comes to requests for information. Though there are a number of variables that can influence the refinance timeline, your responsiveness and preparedness will help move things along much faster.

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Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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The Pros and Cons of a Credit Union Mortgage

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

co-op shared branching for credit unions
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Though banks are better known, their not-for-profit cousins known as credit unions still command a significant chunk of the mortgage market. During the first quarter of 2019, credit unions originated 8% of mortgages in the United States, according to credit union consulting firm Callahan & Associates.

Often overlooked, credit unions can be a good option when shopping for a mortgage. Joining a credit union can make it possible for you to reap benefits such as lower origination fees or a more competitive interest rate.

This article will explore whether homebuyers might get a better deal from a credit union mortgage and the implications a relationship with a credit union might bring.

How is a credit union different from a bank?

Although credit unions fall under the umbrella of financial institutions, they differ from commercial banks in several key ways.

Banks are typically owned by their shareholders, credit unions are not-for-profit organizations owned by their members. This often translates to better rates and terms on their financial products.

While banks can serve the entire nation, credit unions tend to be community-based institutions that play a significant role in serving people in a local area.

“Credit unions are a really important part of the financial services fabric,” said Barry Zigas, director of housing policy at the Consumer Federation of America in Washington, D.C.

On the other hand, credit unions typically don’t offer the same suite of products that a larger bank is often known for. While you can take advantage of a checking, savings or individual retirement account, for example, you may find it challenging to access financial planning or investment services.

Below we highlight how credit unions stack up against banks.

Credit UnionCommercial Bank
  • Not-for-profit organization
  • Member-owned
  • Typically have higher yields on deposit accounts
  • Typically have lower interest rates on credit and loan products
  • Membership is based on an affiliation or geographical location
  • Smaller branch and ATM networks
  • Federally insured up to $250,000 through the National Credit Union Administration
  • For-profit organization
  • Shareholder-owned
  • Yields are usually lower on deposit accounts
  • Interest rates on credit and loan products are usually higher
  • Anyone can establish a relationship with a bank
  • Larger branch and ATM networks
  • Federally insured up to $250,000 through the Federal Deposit Insurance Corp.

Getting a mortgage from a credit union

One of the main differences when applying for a mortgage through a credit union rather than a traditional bank is that you must be a member of the credit union before you can attempt to borrow money.

Credit union customers own “shares” in the institution, typically via a $5 deposit held in a particular savings account.

In order to become a member, you must meet the membership requirements outlined by the credit union you’re interested in joining. Credit union members have a common bond, which could be any of the following, according to the National Credit Union Administration:

  • An employer.
  • A geographical location where those interested in joining live, work, worship or attend school.
  • A group membership, such as a homeowners association or labor union.

Family members of credit union customers are also often eligible to join.

One of the key reasons for choosing a credit union: You may be able to save money on lender fees, said Bruce McClary, vice president of communications at the National Foundation for Credit Counseling. A credit union may also be more flexible with credit score requirements than a bank and may offer lower mortgage interest rates.

However, since credit unions are small organizations, there’s the risk that your credit union’s name or ownership could change. Your credit union could also sell the rights to service your mortgage to a third party, which may impact your customer service after your loan closes.

“Even though you may be saving money on origination fees and you may not be paying as many other fees with your mortgage — so it might be more affordable at the onset — you may end up having to deal with a servicer that you weren’t dealing with before, rather than dealing with your credit union,” McClary said.

It’s important to note that bank-originated mortgages can also be sold and handed over to other servicers, so this issue isn’t unique to credit unions.

Still, developing a relationship with a credit union over time — as in, the organization’s representatives are very familiar with you and your finances — could work in your favor when you decide to apply for a mortgage, McClary said.

“Being a member of the credit union might actually put you in an advantage in terms of approval or maybe in terms of negotiating terms of the mortgage in the application process,” he said.

Pros and cons of a credit union mortgage

Consider the following benefits and drawbacks of a credit union mortgage before you choose this type of lender for your home purchase.

Pros

  • Potentially lower origination fees and other lending costs.
  • Mortgage rates may be lower.
  • A greater sense of community, since the institution is member-owned.
  • Potential for more negotiating room during the mortgage lending process.
  • Shared branching benefits, which allow you to use the services of an outside credit union.

Cons

  • You must meet eligibility guidelines to join the credit union and become a member before applying for a mortgage.
  • Credit unions typically have smaller branch networks.
  • There’s the risk of your credit union closing, switching owners or going through some other changes, which can affect how your mortgage is serviced.
  • Typically carry fewer product offerings than traditional banks.
  • May have limited online banking capabilities.

The bottom line

A traditional bank isn’t your only option for getting a mortgage. Depending on what your lending needs are and how much you value building a relationship with your financial institution, a credit union might be right for you.

However, if you’re concerned about mortgage servicing, be sure to check with your credit union for more information about how they plan to handle your mortgage once it’s originated.

“I think consumers who are members of credit unions should certainly go to their credit union and find out what their loan terms are, what the application process is like and maybe even ask, ‘Are these loans that you hold or are these loans that you sell off?’” Zigas said.

Zigas also recommended practicing that same due diligence with other types of mortgage lenders and shopping around.

“It’s a very competitive environment, and there’s no assurance that your credit union will actually be offering you the best possible rate,” he said.

It pays to comparison shop before you settle on a particular mortgage lender. For example, if you were looking to buy a house that required a $300,000 mortgage, you could potentially save more than $42,000 in interest over the life of a 30-year term by shopping for the best rate, according to data from LendingTree’s latest Mortgage Rate Competition Index.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Crissinda Ponder
Crissinda Ponder |

Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here

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We Downsized Our House So We Could Travel the World

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Purchase agreement for house

You’ve settled into your dream house and have called it home for years. But now you realize your family has more house than it actually needs, plus a large mortgage to match. Is it time to downsize?

The answer depends on what your financial and lifestyle goals are. Below, we share one story about a Florida-based family downsizing their home. Giving up 1,600 square feet allowed them to pay off their mortgage in a fraction of the time and achieve their goals of globe-trotting.

Keith and Nicole’s downsizing story

Keith and Nicole DeBickes loved their house in Delray Beach, Fla., but with more than 3,500 square feet of living space, it was perhaps larger than they actually needed at the time. “One day, I came to the realization that I had a 400-square-foot bathroom that I spent 20 minutes a day in, and we had this big formal dining room and formal living room that we never used,” Nicole said. “And we had a really big mortgage to cover it.”

She also wasn’t thrilled with the schools in the area — or with the idea of paying for private education. She and Keith knew they had to make a change.

The DeBickes (who work as an engineer manager and software engineer, respectively, and make between $100,000 and $200,000 combined annually) put their house on the market and started looking for a smaller home that was zoned for better schools.

They eventually settled on a 1,900-square-foot, four-bedroom house in Boca Raton. “We wanted to buy with the idea that we’d have a much smaller mortgage and we wouldn’t have to pay for private school,” Nicole said. “Then we could do things with our family like travel or retire earlier.”

The couple took out a 30-year mortgage for $110,000 in 2007, much smaller than what they had before. They then refinanced into a 15-year loan for $150,000 in 2009 to remodel their kitchen and upgrade their electrical work.

Pros and cons of downsizing your home

Deciding to downsize your house is a major decision that takes a good amount of effort and planning. Consider the following pros and cons before you choose to move forward.

Pros

  • Reduces your mortgage debt.
  • Potentially reduces other housing-related expenses, such as utilities.
  • Frees up cash to reduce or eliminate non-mortgage debt.
  • Gives you a smaller house to maintain.

Cons

  • Reduces your available square footage, giving you less space than you’re used to.
  • Unless you have enough equity to cover the purchase of your new home, you must qualify for a new mortgage.
  • You’ll have to sell your existing home.
  • You will have to shell out thousands of dollars for both your home sale and new home purchase.

Tips to pay off your mortgage more quickly

The DeBickes didn’t like the idea of having a mortgage on their downsized home. “We didn’t want to be working every month for a mortgage,” Nicole said. “We don’t like debt, and we wanted it to be gone.”

The couple buckled down and started making double and triple payments every month on their home loan. They drove older cars, carpooled to save on gas and maintenance and packed lunches to cut down on their food costs. The family took relatively modest vacations, staying with family or driving to the west coast of Florida.

All their diligence paid off — the DeBickles submitted their last mortgage payment in fall 2013.

If you’re on a mission to be mortgage-free sooner rather than later, here are tips to help you get there:

  • Make extra principal payments each month. Try rounding up your monthly mortgage payment. For example, if your payment is $1,325 every month, pay $1,400 instead or increase the amount by even more, if your budget allows. Be sure to communicate to your lender that you want the extra payments applied to your principal balance and not your interest.
  • Pay biweekly instead of monthly. Split your monthly mortgage payment into biweekly payments. Since there are 52 weeks in a year, you would make 26 half payments, or 13 full payments. Making one extra full payment each year could allow you to shave a few years off your mortgage term.
  • Consider recasting your mortgage. If you have at least $5,000 or $10,000 — depending on your lender’s requirements — you could use that lump sum to recast your mortgage. A mortgage recast allows you to lower your monthly payments by paying your lender a set amount of money to reduce your mortgage principal.
  • Dedicate windfalls to paying down your principal. Every time you get a tax refund, bonus or some other windfall, use it to pay down your outstanding loan balance.

Achieving financial freedom

Although they’re now mortgage-free, the DeBickes were still putting money away like crazy. They eventually quit their jobs (temporarily) and traveled abroad for two years with their boys, who were 10 and 7 in 2015. Without a mortgage payment, they were able to amass the $190,000 they thought they needed to travel for 28 months. “We have been living on one salary and saving or paying off the house with the other for 12 years,” Nicole said.

Despite their hefty savings goals, they’ve been able to take the boys to Europe and Costa Rica, too. “We want to really get them prepared for what travel is going to be like,” Nicole said.

The trip, which is outlined on the family’s website, FamilyWithLatitude.com, took the foursome everywhere from Ireland to France, among other spots. Nicole and Keith “road schooled” their children as they traveled, with the help of Florida’s virtual school program that allows them to take classes online.

They planned to rent their home while they were away, which will help finance part of the trip and cover some house expenses, such as insurance and property taxes. In the meantime, they are maxing out their 401(k)s and taking care of college funds for the boys.

“(In 2014) we were able to purchase the prepaid college plan for my youngest son in a lump sum,” said Nicole, who had already done the same thing for her eldest. “So I know that both boys have good college funds to take care of them.”

The bottom line

If you’re looking to move into a smaller home and save money in the process, it might make sense for you to downsize. Just be sure you’re clear on the benefits and drawbacks, and how the choice to cut down your square footage would align with your personal goals.

In the end, the lack of debt will allow the DeBickes the freedom to not only to travel the globe, but to hang out with the important people in their lives.

“With both of us working, we haven’t been able to spend as much time with the kids as we wanted,” Nicole said. “It’s a real luxury that we can do this. I’m looking forward to spending time together as a family.”

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kate Ashford
Kate Ashford |

Kate Ashford is a writer at MagnifyMoney. You can email Kate at [email protected]

Crissinda Ponder
Crissinda Ponder |

Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here

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