Deciding to refinance your mortgage is a big financial decision. Arming yourself with the right knowledge, proper documentation, and choosing the right lender can make your mortgage refinance go as smoothly as possible.
There are some questions that you should ask when picking the lending organization to handle your refinance:
What is your availability? Not everyone that is applying for a refinance loan is available during typical business hours to prepare and collect documentation or to get questions answered. Find a loan officer that is willing and able to discuss your loan at times that you are available.
Can I complete the process online? With technology you are now able to apply online as well as upload required documentation without leaving your home. Not only is this more convenient, it also allows you to perform these functions on your own time without having to coordinate with your loan officer. Make sure that you use a lender that uses these technologies to make the process more seamless.
How much time will the process take? The mortgage industry requires speedy turnaround times. Regardless of the reason for the mortgage refinance, you will want to close quickly so that you can benefit from the refinance.
Documents That are Required for a Mortgage Refinance
Having your documentation prepared when you apply for the mortgage refinance will speed the process and allow you to close more quickly. Here are some items that you should have ready when you apply:
- Paystubs for the last 30-days for all borrowers
- W2 for last 2 years for all borrowers
- Bank statements for last 2 months
- Note from your current mortgage (this was provided to you at closing)
- Current mortgage statement
- Homeowners insurance declaration page
If you are self-employed, there are often other documents that are required such as tax returns, profit and loss statements, and other documents that substantiate your income.
Costs to Refinance
There are fees that are associated with a mortgage refinance. Here are some examples:
- Application fee: Some lenders charge a fee for processing the application. This fee, if collected, will be due even if the loan is denied. Homewise Financial does not charge an application fee.
- Appraisal fee: An appraisal is a valuation of your house to make sure that it is worth the amount that you are trying to lend against it. Although most lenders require an appraisal unless you are doing a streamline refinance, Homewise Financial works with lenders that waive appraisal if allowed by Fannie Mae or Freddie Mac. In the event that the appraisal is not waived, you will need to purchase the appraisal before the loan is marked Clear-To-Close.
- Inspection fee: Depending on the loan product, certain inspections are required and you would be required to purchase the inspection prior to the loan being marked as Clear-To-Close.
- Closing Fee: This fee covers the closing agent who will prepare documents and conduct your closing.
- Title search and insurance: A title search is required by the lender to make sure that the property being financed in free from liens. The lender also requires an insurance policy that protects them against problems with the title that were caused by the previous owner.
Once you apply for a mortgage refinance loan, a Loan Estimate is prepared, and presented to you, that will outline an estimate of costs associated with your loan. At least three days prior to closing, you will also receive a Closing Disclosure which will contain the final numbers and allows you to view all of the fees and taxes associated with your loan.
How Long Does it Take to Refinance?
Most refinance loans can be completed within 30 days, however there are factors that can sometimes extend the process. Third parties involved in the process, such as title, appraisers, surveyors, and any inspections that may be required in the process may be backed up and cause delays in the refinance process. If there are deficiencies noted on any of the third-party services, it may be necessary to make corrections and re-inspected. Errors on your credit report may also need to be corrected before the final approval can be granted on your loan file. Although not typical, these situations sometimes cause delays.
Locking Your Rate
After the application is completed, and the loan is submitted, you will have the option to lock the rate. It is important to understand that rates fluctuate daily, if you are happy with the rate quoted, locking the rate will protect you against the rate climbing before you are able to close on the loan. If the rates are higher than you would like, and you expect them to drop significantly before your loan closing, you do have the option to leave the rate floating. A floating rate is simply an unlocked rate that is subject to lower or raise based on the market condition for the day.
Typical lock periods range from 15-45 days, and sometimes longer. There is a fee built in to the rate for the lock. A rule of thumb is that the shorter the lock, the lower the fee is for the lock. While it may seem like a good idea to just lock for the lowest possible term, there are fees to extend the lock as well as penalties for letting the lock expire. A typical lock used is for 30 days which is a good starting point. If the loan already has been granted a conditional approval, you can start looking at a 15-day lock while you satisfy the conditions. Your loan officer should be able to provide adequate advice on whether the lock period is adequate to get you to closing.
Homewise Financial has built a network of lenders that not only have proven to close loans quickly, but that also offer solutions for us to offset costs involved when problems arise. Depending on the lender, we are able to waive lock extension fees that were caused at no fault of the borrower.
Take a Look at Your Refinance Options
Call us today at (844) 602-3070 to begin a mortgage application, or you can apply online from the comfort of your home or office (or even your smart phone). Once we receive your mortgage application, one of our specialists will call you to discuss your options.