Refinancing My Mortgage Was Easy -- and Saved Me Thousands
Here's how quick and easy the refinancing process can be.
Americans are refinancing their mortgages in record volumes, and it's not hard to see why. Mortgage rates have plunged to all-time lows as a result of the COVID-19 pandemic. That means homebuyers can lock in low interest rates and save thousands of dollars.
However, the surge in refinancing applications has also led to frustrating delays. The average time it took to close a refinancing loan was 50 days in August according to the Ellie Mae Origination Insight Report -- a sharp increase from the 35-day average in March.
Borrowers can shorten this timeline if they choose a lender that focuses on efficiency. And there are some good ones to choose from. Here's my recent refinancing story, and some tips on the quickest and most cost-effective way to refinance your mortgage.
My refinancing experience
After shopping around, I refinanced with Better.com (one of our favorite mortgage lenders). I couldn't be happier with how it went -- my experience was fantastic. Note: I have not been compensated by Better for writing this, I'm just using my own story to offer some suggestions.
First off, here's how the timetable went:
- Aug. 5: My application was approved, I locked my interest rate, and my loan was sent to underwriting.
- Aug. 27: My loan completed the underwriting process and was sent to the closing department.
- Sept. 1: I signed my closing paperwork.
- Sept. 8: My loan was funded and the process was complete.
It took 34 days from the time I applied until the time my loan was funded. And it's worth noting it would have happened a few days sooner if it hadn't been for Labor Day weekend. To make this timetable even more impressive, I'm technically self-employed, which adds significant documentation requirements (and time) to a mortgage application.
Better.com's user-friendly online platform made the process smooth and easy. It posted "tasks" in my portal -- forms to sign, documentation requests, etc. Each afternoon I'd get an email about the tasks I needed to complete. I could scan my documents or even take pictures on my phone. Every time my loan moved to a different stage (such as from underwriting to closing), I'd get a personal email from a Better employee to introduce themselves and let me know what to expect next.
Better.com claims it closes loans 10 days faster than the industry average, and now that I've been through the process I can believe it. I've obtained a total of six mortgage loans, including investment properties, in my lifetime. This was by far the easiest and smoothest it's ever been.
Tips to make your refinancing go as smoothly as possible
Obviously, every refinancing is different, so you won't have the exact same experience I did. However, you can help your refinancing go as smoothly as possible by using these five tips. They could also save you money.
- Shop around: It might surprise you how differently lenders will interpret your credit report and other qualifications. I applied for refinance loans with four different lenders. I was offered rates (with no points) that varied from 3.0% to 4.125%. To be fair, the high rate was a big outlier and the other three were comparable, but even so, shopping around for the lowest rate can save you thousands.
- Focus on the right lenders: If you aren't in any type of rush to refinance, apply with whichever lenders you want. But if time is a factor, focus on lenders that prioritize efficiency and streamlined approval processes.
- Fees matter: Don't just look at the interest rates you're offered. Make sure you use annual percentage rates, or APRs, to compare your loan offers. This includes the origination fee and points (if any) you pay and is more representative of the true cost of borrowing.
- Have your documentation ready: There were a few dozen documentation requests and forms to fill during the refinancing process. Have your income documentation ready (tax returns, W-2s, 1099s, pay stubs, etc.), and respond to any requests from your lender as quickly as practical. That way you can keep your approval time to a minimum.
- Be flexible: Know that you'll need to schedule an appraisal (typically you need to be home) and a time to sign your closing documents. The more flexible you are, the quicker you can get them done. If it hadn't been for the fact that I couldn't make any appraisal appointments work for about two weeks, I could have closed even faster.
The bottom line is that if you're paying over 4% (even less in many cases) on your mortgage, you may be able to save thousands by refinancing. And if you're prepared, you can get your refinancing done quicker than you might think.
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