Step-by-Step Guide to Refinancing

When looking to refinance your home knowing the facts can save you tons of money. Educating yourself minimizes problems during through the loan process. These simple steps will get you to a stress free closing.

Evaluate your Finances

This is extremely important for the success of your loan. Check your income and expenses, both current and projected, to be certain that you will be comfortable with your new monthly payments. Make sure that you determine what size mortgage you can handle and stick to it. When requesting a cash-out refinance, lenders may try to loan you more than you can afford comfortably. Its important to weigh your options early so that refinancing is actually beneficial to your finances and not a burden on your wallet.

Search for a Mortgage Lender

This is probably the most important step after you check your finances. Before searching for a new lender you may want to consult your current lender and discover what sort of benefits and reduced interest rates they provide to existing customers. Remember that you are a customer and the ball is in your court. If you are in good standing with your current lender they may have the best product for you.

There are free services that do the rate and lender shopping for you. You simply compare lenders then choose which rate and loan package works best for you. Comparison-shopping for a mortgage helps to ensure that you are getting the best interest rate for your home loan. Refer to the Refinance Checklist to help you ask the right questions and get the answers to make an informed decision about your lender and refinance loan.

Experience is important, especially if any sticky, unusual situations arise during the mortgage process. Referral is sometimes your best bet. If you know someone who recently refinanced and were happy with their service provider and new loan, contact the person they worked with. The loan agent may give you some sort of kickback for being a referral.

Make sure that you and your financial professional communicate clearly. They should be happy to cover every point that you may not understand until you are comfortable. Find out how to get update status on your loan before you start. This will save many frustrating moments during the process.

Check Your Credit Report

Be aware of what's on your credit. If there are derogatory items, it is harder for your lender to get the lowest interest rate for you. It may also delay the loan process because all derogatory items must be eliminated or explained. Derogatory items are things like late pays, wrong balances, debts on your report that are not yours (it does happen), or any other negative comments on your report. You may be able to work with your selected loan officer to get some items cleared off your report. Often times a lender may require that you pay off certain debts when obtaining a cash-out refinance. Be sure to consider this while selecting a lender because this will affect the total given to you from your cash-out refinance. You can get your credit report online. You should check Experian, Equifax, and TransUnion since these are the credit bureaus used by all lenders.

Applying for the Loan

This can be the easiest part of the loan process if you prepare yourself. At the time of application, your lender will ask you for all financial information needed for the loan. This includes income verification, paycheck stubs, bank account statements, tax returns, rental agreements, proof of insurance, divorce decrees, investment information, and credit history information.

You may not have all of the documentation at the time of application, but your lender will give you a list of what is needed. Make sure you submit all documentation in a timely manner. Any delay in turning in the information may delay the loan.

Processing the Loan

After all information is submitted there may be a gap in time before you hear from your loan agent. This is perfectly normal since the loan has to be set up and processed by the lender. This may take several weeks since it is a detailed process. Be patient during this time.

During this process, the lender may ask you for additional information. You should provide this information as soon as possible.

The Closing

After your file has been evaluated, processed and approved you will be contacted to schedule a closing to sign all documents. Be sure to keep this appointment, as rescheduling will delay funding.

You may also be asked to bring other things to the closing, such as cashiers check, updated insurance information, or statements from your creditors. Make sure you bring everything, since the closing could be delayed if you don't have them.

How Do I Refinance.com © 2006. All information provided within this website is designed for consumer use only, and is provided as-is, with no implicit or explicit liability.