A cash out refinance has become a popular way to tap into your home’s equity in recent years. In 2021, almost 25% of homeowners opted for a cash-out refinance. The process of getting approved for a cash out refinance tends to be faster than a HELOC or home equity loan, but how long does it actually take?

If you ask a loan officer, they’ll most likely say anywhere from 30 to 45 days. While this is generally true, there are plenty of instances where it can take much longer. Read below to understand the factors that affect approval times for a cash-out refinance.

Cash-Out Refinance Process Timeline

Every lender's process is slightly different, but this is a general overview that applicants can expect.

Get Pre-Approved

Getting approved for a cash-out refinance is largely dependent on how quickly you can verify your personal information and the speed at which the lender decides to move. The initial application process is fairly simple and can be done in a few minutes or done online.

However, you can do a bit of self-evaluation before you get started, to be sure that you're in the running for the refi. You will need:

1. Sufficient Equity: Lenders typically require a mininum of 20% equity built up in your home, though there may be exceptions.
   
2. Credit Score: The higher your credit score, the more likely you will be accepted, and the more favorable your terms are likely to be.
   
3. Debt-to-Income (DTI) Ratio: Your DTI ration is the ratio of your monthly debt payments to your overall monthly income. A lower DTI ratio will be a strong point in your favor.
   
4. Loan-to-Value (LTV) Ratio: The LTV ratio compares the loan amount to the appraised value of your property. There is often a maximum LTV, which is likely to be around 80-85%.
   
5. Income Verification: You will need to provide proof of your income, such as pay stubs, tax returns, or other documentation.
   
6. Appraisal: Lenders will probably require an appraisal in order to determine the current value of your home.
   

Compare Lenders

Because each lender is going to be different, make sure to do your research and draw comparisons in order to find the best fit. Take account of loan terms, interest rates, and customer reviews!

Schedule Property Appraisal

A home appraisal is a report from a qualified professional that estimates the value of a home. When you buy a home, you will usually hire an appraiser to visit the home, review its condition and characteristics, find comparable properties that have recently sold in the area, and provide both you and the seller of the home with a fair estimate of its value. A property appraisal is an important step in the cash-out refinance application process, as the lenders need to establish the current value of your home in order to determine the Loan-to-Value Ratio.

Gather Financial Documents

As we mentioned, there are several documents you will need to submit as part of the refinancing application process.

1. Proof of Identity and Residence: A passport or driver's license, and proof of residence such as a utility bill
   
2. Proof of Income: recent pay stubs, W-2 forms, tax returns, and/or proof of other income sources (such as alimony)
   
3. Asset Documentation: bank statements for all accounts, including retirement accounts like your 401K
   
4. Property Information: copy of your most recent property tax bill
   
5. Current Mortgage Information: a statement from your current mortgage lender that shows the outstanding balance, interest rate, and monthly payment
   
6. Property Appraisal: The lender might arrange this for you
   
7. Credit History: consent for the lender to access your credit report, as well as information about your credit accounts, debts, and payment history
   
8. Other Documentation: information about any other properties you own, divorce decrees, and additional documents as requested by the lender

Apply for Cash-Out Refinance

The application form itself can often be filled out online, though you can usually opt for an in-person one if that is your preference. It might be easier to upload documents from your computer, but many lenders will also offer the option to send them in the mail.

Something to keep in mind: a cash-out refinance "seasoning period" is the amount of time you must wait after obtaining a mortgage or refinancing your mortgage before you are eligible to apply for a cash-out refinance on the same property. This period is meant to mitigate risk by ensuring that the borrower has established a history of timely and responsible mortgage payments before accessing additional funds. The seasoning period may be six months, or up to a year.

Go Through the Underwriting Process

Because the underwriter's job is to assess your financial stability, creditworthiness, and overall risk, the process can often be the longest benchmark in the process. Be aware that the refinancing underwriting process can take some time--anywhere from several days to several weeks--however, the wait is likely to be much less if you have your documents in order and are prepared to provide additional documents if the underwriter requests it.

Eric Rosenberg, a former bank manager, mentions that you can help speed up the process by being proactive with your paperwork. “It’s usually a little detail like a forgotten letter or statement that slows things down,” he says. “If you provide all required documentation alongside your application, you can expect a smoother process overall.”

How Can I Speed Up the Refinance Application Process?

Approval time can depend on your financial situation, such as your credit history and how much home equity you have. The higher your credit score, the more likely you’ll be approved faster than someone with a fair score. Your credit history will also be taken into consideration, so if yours is less than stellar, it could mean approval time could be delayed or you might be rejected. If possible, you can try to boost your credit score before even starting the application.

It’s always a good idea to gather all necessary documentation before you apply. That way, not only can you speed up the process, you can also check to see if you can even afford a loan in the first place.

Next Steps After Approval

Like other types of home loans, you’ll be asked to meet with your lender to finalize the loan once all required documentation is verified. Officially closing the loan can take one or more days. Federal law says that if a homeowner refinances a loan from another lender, they have three days to back out. This means that your lender most likely won’t give you the funds until the three-day period is up. There could be further delays if you close a loan around a bank holiday or if there is a delay in the escrow process.

Other Ways to Get Home Equity

For some, getting refinancing quickly is important as they may need money urgently. However, no matter how efficient your paperwork, delays are more common than you think. Try to take a more leisurely approach if at all possible. You want to have time to shop around for the best rates.

You should also consider alternative programs like obtaining an equity sharing agreement from Unison, which requires no monthly payments. Unlike a loan, with Unison’s program you simply allow the company to share in the future change in value of your home. If the home’s price goes up, they share the gain. If the home’s price goes down, they typically share the loss. A Unison Agreement also does not accrue interest, so you don't ever have to worry about the status of interest rates.

Whatever you decide, make sure to look at the risks involved and ask questions to understand the program before making a decision. You owe it to yourself to take the time you need to get all the information.

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