How Refinancing Works
When you refinance a loan, this simply means you use money from a new loan to pay for your current loan. Whether you want to decrease debt or maybe lower your interest rate, refinancing can offer many benefits.
Getting Started
Early in a refinance, you will need to obtain a variety of materials before the process can begin. Things like your work history, current mortgage information, any debt or financial documents are all needed to get started. In addition, you may need to include other assets or obligations that may affect your refinancing.
Completing an Application
You will use the information you've collected to fill out an application. You can do this manually on paper or online, depending on the company. Once complete, a mortgage expert will submit your information to a lender that can offer the best loan for your needs.
Obtaining Approval/Verification
Depending on the loan, you may need to submit pay stubs, tax information or bank statements to gain approval. After you get approved, you will be in contact with your loan processor to outline any extra details or conditions needed to arrange the documents. In addition, this is when your loan processor will need to verify that things such as employment, rental history and mortgage information are correct.
Coordinating Title, Escrow and Appraisal
In order to confirm the title to the property is clear of any problems and also request settlement of any recent mortgages, a title insurance or escrow company is contacted. You will need to have your home appraised at this point to know your property value. Knowing your property value is essential during a refinance because your home's worth can affect your interest rate or cash potential. Also, to take care of the appraisal cost, your loan processor needs to be paid in advance.
Preparing Loan Documents
Getting homeowner's insurance is necessary when preparing loan documents. Your loan processor and insurance agent should communicate regarding coverage. Once that's done, you will also need to ensure any lender conditions or requirements are submitted to the underwriter. The underwriter will review and confirm all conditions, and then the loan documents are drafted. This may take a couple of days. When complete, the lender sends the documents to the title and escrow company.
Final Steps
The title and escrow company will review all the information and then will coordinate a time for you to sign the documents. You will also bring money to pay closing costs. The title and escrow company will give you the cost. The signing process can take up to an hour and you will get a copy of all signed documents at the end. Finally, the lender will receive and review your loan documents. If everything's in order, the funds will be sent to the title and escrow company. The title and escrow company will send the funds to your other mortgage company in order to pay off current loans, and then they will document the transaction with your county.
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