When you’re looking to refinance your investment property, chances are that you need the money sooner rather that later. The actually refinancing process itself can range from three days for a Fast Track refinance to several months if your situation is complicated. You can shorten the time it takes to gain approval by doing a little work before you apply.
Laying the Groundwork – one hour to several months, depending on the state of your credit
The place to start the process is with your credit report. Many people looking to refinance are looking to get more favorable rates and terms, and that takes good credit. You can get one free credit report per year from the big three reporting agencies, Experion, Equifax, and TransUnion. You’re looking for:
– Your FICO score
– Any inaccuracies in your personal information
– Any inaccuracies in your credit history
If your FICO score is 750 or above, you’re in good shape. A lower score means you need to takes steps to raise it. Pay down any credit card accounts, but don’t pay them off completely or close them. Lenders want to see open, active accounts that are current, with a low balance relative to your credit limit.
Any inaccuracies should be addressed. If you have a late payment history, and the payments are current, appeal directly to the creditor to have them removed from reporting. Try to clear up any defaults or judgments, and pay off any accounts that are in collection.
Getting Your Paperwork Together – this shouldn’t take any longer than a day or two.
Once you have your credit report in good shape, it’s time to gather any documents that a lender might need. All of these may not be necessary, but it’s better to have them at hand than to hit delays while you get it together. Get a folder and fill it with:
– One month’s worth of pay stubs or proof of other income
– W-2s for the previous two years
– At least two previous months of bank account, retirement account, and investment account statements
– Current proof of homeowners’ insurance
– Most current mortgage statement
– Discharge papers, if you’ve ever filed bankruptcy
– Letter of explanation for any credit issues you were unable to clear
It’s also a good idea to have a list of questions to ask prospective lenders. You want to know what type of loan products they offer and if they have any programs for landlords or those who own investment properties. You should also be prepared to discuss your specific goals or reasons for wanting a refinance.
Applying for Refinancing – this can be done in one day, if you have a lender and have all of your paperwork in order.
This process can be done either by going to local lenders or shopping for a refinance online. Some online lenders can give you approval within 24-hours. Whichever avenue you choose when you decide on a lender, make sure that your application is filled out completely and accurately, and that all information matches your documentation. Check to make sure that no other information is needed.
The Final Steps – these can vary by circumstance and lender
You’ll need to have an appraisal done so the lender knows that value of the property. If you’ve had an appraisal within the previous six months, this should be good enough. Having an appraisal done before you apply for a refinance will save even more time. It could take up to a week to get an appraisal scheduled, depending on the appraiser’s availability. Make sure that your home is in the best possible shape beforehand.
The next step will be for the lender to send your application to an underwriter for final approval. Some lender’s underwrite their own loans, so choosing one that does reduces even more time toward final approval. You should receive confirmation within a few days to a week if everything is in order with your application. Then, you’ll be issued a notice of approval with the loan amount and terms.
If you’re satisfied with the terms and the loan company needs no further information, the only thing left to do is lock in an interest rates and sign the loan documents. The funds will be used by the closing agent to pay off your outstanding loan, and you’ll receive a new mortgage. You should be ready to close on the loan within a few days after it’s filed.
You could say that the refinance process falls in two parts, one directed by you, the other by the lender. Having title to a property that you can use as collateral isn’t enough to qualify you for a refinance. You can increase your chances of approval and get your loan processed faster by being prepared before finding a lender.