Applying for a refinance is similar to applying for your first mortgage loan. You’ll submit an application to your lender along with some financial documentation. Your mortgage lender will then schedule underwriting, a home appraisal and your closing date. Do you think a rate-and-term refinance might be right for you? Here’s more information on what you can expect from the process. The first step in any refinance is to apply with your lender of choice. Research lenders in your area and consider current mortgage interest rates. You also have the option to refinance with your current mortgage lender. Submit an application to your chosen lender and specify that you want to refinance your rate or term. Your lender will ask you for a few important financial documents when you apply for your refinance, including your:1. Apply For The Mortgage Refinance
- Two most recent pay stubs
- Two most recent bank statements
- Two most recent W-2s
You may need to provide additional documentation if you’re self-employed. Have your paperwork in order before you apply for a faster refinance.
Your lender will begin the underwriting process once you submit your refinance application. Your lender verifies your income during underwriting and makes sure that you qualify for a refinance. Respond to all lender inquiries during this time to help keep your refinance on track.
2. Lock In Your New Rate
Your lender will give you a document called a Loan Estimate after you apply for your refinance. Your Loan Estimate gives you an estimate of the fees and costs associated with your new loan. Hang onto this document – you’ll need to compare it to your Closing Disclosure later on.
You’ll also have the option to lock in your mortgage rate. Interest rates change on a daily basis. When you lock in your rate, you protect yourself from interest rate changes that occur between your refinance application to closing. Most lenders allow you to lock your rate for 30 – 60 days.
Want to extend your rate lock? You may need to pay an additional fee.
3. Get An Appraisal
Your lender will also schedule a home appraisal to determine your home’s value. Appraisals are important because they assure your lender that they aren’t giving you more money than your home is worth. You’re free to attend the appraisal when you refinance because you already own the home. Make sure your property is in the best condition possible before the appraiser arrives.
If you’re opting for a certain type of refinance like a VA or FHA Streamline, you may be able to skip the appraisal requirement.
4. Review Your Closing Disclosure
Your lender will issue you a document called a Closing Disclosure before you attend your closing. Your Closing Disclosure contains important details about your new mortgage. You'll find your principal balance, interest rate and monthly payment. Read through this document carefully and make sure the terms match up with the refinance you want.
If you’re refinancing to a longer loan term, make sure your monthly payment is lower than your current payment. Are you getting a lower interest rate? Your monthly payment should be lower as well. Compare your new Closing Disclosure with the terms of your current loan and make sure all of the information is correct.
5. Close On Your New Loan
Once your lender finishes underwriting, it’s time to close on your loan. After you read your Closing Disclosure and make sure the terms are correct, contact your lender and acknowledge that you’ve received the Closing Disclosure. Your lender will then schedule your closing meeting.
At closing, you’ll ask any last-minute questions you have about your new loan and sign all the necessary paperwork. Bring along your photo ID, your Closing Disclosure and a proof of transfer or a cashier’s check to cover your closing costs. Your lender will appoint a neutral third party to conduct the closing and finalize your refinance.
