April 19, 2023
If you have equity in your home, you may be eligible to access the cash to make home improvements, pay down high-interest debt, or for any other need you have. But how long do you have to wait for the funds?
How long does it take to get a cash-out refinance?
Like any mortgage, it takes time to close a cash-out refinance. The process typically takes about 45 to 60 days. Let’s explore some commonly asked questions that can help you get your cash on time – and maybe even sooner.
How soon can you do a cash-out refinance?
Your first question may be: Am I eligible? Typically, you must wait at least six months after a home purchase to refinance with a cash-out. You’ll also want to make sure you have enough equity and it’s a smart financial move before committing to the decision.
What is the cash-out refinance closing process?
The cash-out refinance closing process is much like an original home purchase minus the sales contract. You must prove that you can afford the loan, provide your documents, and lock in your rate. A typical cash-out refinance process includes:
- Getting preapproved to determine what rate and term you qualify for to ensure a cash-out refinance is right for you
- Completing your lender’s loan application
- Providing the required documentation
- Scheduling a home appraisal
- Responding to requests for additional documentation as needed
- Waiting for the “clear to close”
- Closing on your cash-out refinance
- Receiving your funds on the disbursement date
The more in-sync you are with your loan officer and the faster you provide the necessary documentation, the quicker you can close on your loan.
What is a cash-out refinance disbursement date?
Cash-out refinances have a three-day rescission period allowing you an opportunity to change your mind about the new loan. That’s why you won’t get your cash at the closing table. If you move forward with the loan, you’ll receive your funds on the fourth day – the disbursement date.
For example, if you close on Monday, you have Tuesday, Wednesday, and Thursday to change your mind. If you keep the loan (don’t rescind), the loan will fund on Friday, which is when you receive your share of the equity that you took out with the cash-out refinance.
What documents are needed for a cash-out refinance?
Ideally, you’ll have all your refinance documents ready when you apply for the cash-out refi. Providing all the documents at once eliminates the necessary back and forth between the underwriter, loan officer, and yourself. Here are the documents to gather:
- Paystubs covering the last 30 days of income
- W-2s for the previous two years
- Tax returns for the last two years if you’re self-employed
- Last two months of bank statements
- Contact information for your employer
- Proof of homeowners insurance
- Proof of other income sources
- Letters of explanation for any gaps in employment or credit issues
This is a basic list of what each borrower needs. If your loan officer asks for further documentation, the faster you act, the faster you can close your loan.
Do I need an appraisal to refinance?
If you’re taking cash out of your home’s equity, you may be asked to get an appraisal. The type can determine how long it takes to close on your loan:
- Full Appraisal – A full appraisal is similar to the one completed when you bought the home, with one significant difference: you can be present. This can be beneficial because you can stage the house to look bigger, spruce up each room, and have a list of improvements you’ve made that may have gone unnoticed. However, it is the most detailed and time-consuming.
- Drive-By Appraisal – If you only need a drive-by appraisal to refinance, the appraiser doesn’t have to come into the home. You don’t even have to be home when they do the appraisal. The report is less involved and takes less time, which may speed up your closing time.
- Appraisal Waiver – Sometimes borrowers can request an appraisal waiver. Just as it sounds, it’s a waiver to the traditional appraisal. Instead, lenders can use automated data from an underwriting system to determine your home’s value. This option is reserved for good credit borrowers who aren’t at risk of default, and for properties without grave concerns about its value. It speeds up the time to close.
How long does a refinance take after appraisal?
It’s common for the final underwriting to take about two weeks after an appraisal. Of course, any appraisal problem can delay the cash-out refinance process. There are many reasons an appraisal could be an issue, but here are the most common concerns:
- Appraisal comes in too low. If you think your home is worth one value and the appraised value is lower, you could receive less cash than you anticipated.
- There aren’t enough comparable sales. Appraisers get your home’s value by comparing it to homes that sold recently in the area. If you live in an area with few sales, it could be harder to find appropriate comparable sales.
- The appraiser may consider the neighborhood declining. Appraisers have the discretion to rate a neighborhood increasing, stable, or declining. Anything but declining is okay, but if the appraiser thinks the neighborhood is in trouble, it could affect the amount of money you can take from your home’s equity.
Expect a cash-out refinance to take 45 to 60 days, but with a little help, you may speed up the processing time. The faster you provide documentation and secure the appraisal, the faster your lender can underwrite and process your loan. It’s a team effort to get the cash in hand that you want from your home equity.
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