Take the guesswork out of refinancing

When refinancing a home, you want to know your refinance goal, find the best lender and product to achieve it, and get your paperwork together to make it happen.

It’s easier than you think.

As long as you know what to expect and come prepared, you’re likely to find a solid refinance deal and save a bundle over the life of your loan.

In this article (Skip to…)

• Refinance checklist
• Should you refinance?
• Check your financials
• Gather your paperwork
• Shop around
• Apply for the loan

Jon Meyer, The Mortgage Reports loan expert and licensed MLO, has a few extra tips to help you with your refinance checklist. He recommends: 

• Bring pay stubs for the past (1) month at minimum, though lenders may ask to see more 
• In terms of tax documents, have two years worth of W2s tax returns ready, just in case. It’s better to have more documentation than less 
• When you print or send your bank statements, you’ll need the past two months or the most recent quarterly statement. Make sure to include all pages, even if blank 
• You don’t necessarily need to bring your own credit report or mortgage statement; the lender can typically request these for you. Though it may help to check them on your own first, as this will help you understand what rate and savings you should be in line for

• What will a refinance accomplish? Maybe you want to pay off your mortgage debt quicker. Or you may want to lower your monthly payment or drop private mortgage insurance. Perhaps you seek to tap into your home’s equity and pursue a cash-out refi to fund a home improvement project. Narrow down your goals.
• Can you cover refinance expenses? The closing costs and fees associated with refinancing a mortgage can often equate to 3% to 6% of your outstanding balance.
• How much longer do you plan to live in your home? “Before attempting a refi, you need to evaluate whether it will, in fact, save you money,” attorney Elizabeth A. Whitman says. She adds that a refi might be cost-prohibitive unless you plan to stay put for at least three years.
• Can you show consistent proof of income? And can you count on this source of income continuing for at least three years?
• If cash-out refinancing, is a cash-out refinance the best option? There are other loan options for borrowers who want to leverage their home equity, such as a home equity loan or a home equity line of credit (HELOC). Explore alternatives before setting on refinancing your existing mortgage.
• Will you be penalized for paying off my current mortgage? Some mortgage loans apply prepayment penalty fees. If yours does, find out how costly this can be.

You can obtain a free credit report through various online vendors, including annualcreditreport.com. 

“Do this months before attempting a mortgage refinance. And correct any errors you see in your credit report long before applying,” says Whitman. “Even making small changes on your report can improve your credit score and result in a better interest rate.”

Many lenders require a minimum credit score of 620 to refinance a conventional loan. While there are no credit minimums set for FHA loans and VA loans, lenders will have their own criteria — so it’s important to shop your rate around to get the best deal.

Examine your most recent mortgage statement 

Or find your original paperwork. Determine your current interest rate, unpaid principal balance, and maturity date. This will help you understand how much you stand to save on your refinanced loan, and what rate you need to achieve your goals

Learn what your home is worth

Use free online tools from Redfin, Realtor.com, and other sites that estimate your home’s current value.

Avoid applying for other lines of credit

In the months leading up to refinancing, be sure not to apply for additional lines of credit, such as personal loans and credit cards. “Too many credit inquiries can result in a reduction of your credit score,” says Whitman.

Most of the time, you’ll sit with or speak over the phone with your loan officer, broker or processor. They will fill out the mortgage application (Fannie Mae Form 1003), and you’ll sign the printed version (ask if it differs from the information you provided). “Also, read the details and anything you sign very carefully,” notes Jacobson.

Provide additional documents your mortgage lender requests

“And complete everything asked of you in a timely manner,” Jacobson says.

Stay in contact during the loan application process

“Find out who the loan officer is assigned to you. It’s important to have a point of contact between now and after closing,” adds Jacobson.

Prepare for the home appraisal

Most refinance loans require a new home appraisal to verify the home’s current value. 

“Before they can underwrite the loan, your lender will order a home appraisal. You usually have to pay for this at the start of the process,” says Vincent Geraci, senior vice president and mortgage sales manager with Unity Bank.

However, there are some exceptions to the rule.

Streamline Refinance programs from the FHA, VA, and USDA, for instance, don’t require a new home appraisal. And qualified conforming loan borrowers might get an appraisal waiver from Fannie Mae or Freddie Mac in order to avoid this fee. 

Respond quickly to additional requests

“Once approved, the underwriter may require additional documentation or conditions. This will be provided in the form of a list,” Geraci says.

“Once your appraisal and title are received and considered acceptable, and you have satisfied any other conditions, the underwriter will issue a clear to close. A closer will then reach out to you to schedule your closing.”

Get started on your refinance

Refinancing is not simple, but it doesn’t have to be overwhelming. And the benefits can be surprising.

Get started with your refinance goals using the link below. Today’s rates are low, so it’s the perfect time to get rate quotes to find your best deal.

Verify your new rate (Dec 16th, 2021)