The Mortgage Refinancing Process – Soup to Nuts

Mortgage rates continue to hover near historic lows, making it an ideal time to refinance a home loan. The application process includes several steps, but those willing to engage in the process can likely expect a new loan with better terms. This could mean lower monthly payments, a speedier payoff, or both. If you’ve never refinanced, the process can seem a bit overwhelming.

One of the first questions to ask your mortgage refinance lender is whether there are any fees due any upfront fees. Most refinances come at a cost of several thousand dollars, so you’ll want to ensure that your refinanced monthly payment savings will offset that cost. Your lender should be able to provide you with a cost-benefit analysis that takes into account the time remaining on your current loan, the size of your loan and the mortgage rate you qualify for. If the numbers don’t work in your favor, it’s probably not the right time to refinance, and you can always choose to forego the process.

Like your original home loan, a refinance requires a standard mortgage application. Your lender will discuss the loan options with you, and once you choose you’ll be required to provide financial documentation. This will likely include bank statements and pay stubs.

Once you’ve applied, the lender will begin the mortgage underwriting process. The company will evaluate your financials to determine whether to assume the risk of your new loan. When you’ve been approved, the closing process will begin. Similar to your original home purchase, this refinance closing process will ensure your new loan is applied to pay off the old one, and your new loan will become active. At this point, your monthly payments will now be applied to the new loan.

Just as with any loan application process, it’s important to shop around for the best terms. Be sure to meet with several lenders, and ask about any special re-fi offers.

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