December 30, 2021
If you have equity in your home, you may be eligible to tap into it. This is exciting news, especially if you have big plans for the money, such as home improvements or paying for a vacation. But how long do you have to wait for the funds?
Like any mortgage, it takes a little while to process and close a cash-out refinance, but overall, it should take about 45 – 60 days.
Here’s the good news, though.
You can help speed things along to close faster. Here’s how.
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 everyone needs:
- 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 homeowner’s insurance
- Proof of child support or alimony (if you pay or receive it)
- 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.
You’ve likely noticed that this is similar to when you bought your home. A cash-out refinance is about the same because you must prove you can afford the higher loan amount and that your home is worth enough money.
But other factors affect how fast you close, including the appraisal.
If you’re taking cash out of your home’s equity, you’ll need an appraisal, but the type can determine how long it takes to close your loan.
If you need a full appraisal, it’s just like the appraisal conducted when you bought the home with one significant difference – you can be there. This can be beneficial because you can stage the house to look bigger by clearing clutter, sprucing up each room, and ensuring each room has adequate lighting.
You can also point out any upgrades or improvements you’ve made to the home that may have gone unnoticed. Providing the appraiser with a list of the enhancements can be helpful.
If you only need a drive-by appraisal, 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 more minor and takes less time, which may speed up your closing time.
Sometimes (this isn’t the case for every loan), you 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.
If you’re lucky enough to qualify for a cash-out appraisal waiver, you’ll speed up the closing process. This option is reserved for good credit borrowers who aren’t at risk of default, and for properties without grave concerns about its value.
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:
- The appraised value 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.
The cash-out refinance closing process is much like the purchase without the sales contract. You must prove that you can afford the loan, provide your documents, and lock in your rate. Here’s how it goes:
- Get pre-approved to determine what rate/term you qualify for to ensure a cash-out refinance is right for you.
- Complete your lender’s loan application
- Provide all documentation mentioned above (income, asset, letters of explanation, etc.)
- Schedule the home appraisal
- Respond to the loan officer/underwriter’s requests for additional documentation as needed
- Wait for the ‘clear to close.’
- Close on your cash-out refinance
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. Refinance loans also have a 3-day rescission period so that you won’t receive your funds until the fourth day.
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.
Expect a cash-out refinance to take 45 – 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 we can underwrite and process your loan. It’s a team effort to get the cash in hand that you want from your home equity.
To learn more about PenFed loans or what loan is right for you: