In our last blog post, we explained why you may want to refinance your home loan; which means paying off your current mortgage with a new mortgage. Homeowners often take advantage of this option to have a more desirable mortgage loan, usually at a lower interest rate or over a shorter period of time.
In today's post, we're explaining what to expect when refinancing a home.
Our big tip: Different lenders have different home refinancing loans to offer, so it’s good to shop around periodically to see if there’s a better mortgage loan available to you. Pay attention to all the fine print to make sure you are getting a better refinanced mortgage than the one you already have.
How to Refinance Your Home in 7 Simple Steps
1. Determine Your Financial Goals
- Estimate how long you plan to live in your home.
- Consider every debt and how much interest you are paying.
- Review your current mortgage terms.
- What do you expect to achieve by refinancing?
2. Talk to More Than One Lender
- You don’t have to refinance your home with your current lender! This is something homeowners don’t always consider; or they assume the options will be the same with every lender.
- You should get 3-4 refinancing loan quotes from lenders to make sure you are getting the best deal.
3. Apply & Receive a Pre-Approval
- When you’ve found the best refinancing loan offer - and have reviewed for any unexpected fees and costs - submit your application to the lender! The mortgage company will review your current and past finances to see if you qualify for a good mortgage refinancing option. This review could include your income, credit, assets, and property type.
(Keep scrolling for knowing when the property review takes place and our tips for refinancing.)
4. Wait for the Appraisal & Property Review
- A title report will be requested and the homeowner’s insurance binder will be ordered.
- The lender will hire a licensed appraiser to make a complete assessment of the current value of the property. The appraiser is an impartial party who will visit your home to take notes and pictures before making a final assessment. The terms of the loan will be based on the appraiser’s property value.
- The appraiser could determine that your home is worth more or less than you and your lender expected, which would then change the terms of the refinanced loan.
5. Receive the Official Approval
- All of the information on your financial position and the property will be carefully evaluated by an underwriter. At this point, you may need to provide additional documentation so that the underwriter can make a properly informed decision.
- When the underwriter has made a final decision and approved the loan terms, you will receive an approval letter with all the terms of the new loan.
- Read through the terms carefully and look for any unexpected expenses that might cost you more money over time.
6. Submit Documents & Sign the Papers
- After the underwriter has cleared your documentation, the refinanced loan documents will be prepared and delivered to the title company.
- The escrow office will receive the loan documentation from the lender, prepare the new documents, and contact you to sign.
7. Start Fresh With Your New Mortgage Terms
- The funds will be released for disbursement once the lender has reviewed everything and all the terms have been met.
- When all the funds have been disbursed, the title company will record your new lien at the county.
- Depending on your new loan terms, you can now enjoy a lower monthly payment, plan for a shorter loan term, or use the money you received to improve your household’s finances!
Helpful Tips for Refinancing
You can save yourself money and create opportunities by refinancing your home mortgage. To make sure your refinancing process is as successful as possible, save these tips:
- Be prepared financially and with proper documentation.
- Understand the mortgage process.
- Avoid high fees and credit issues.
- Read the terms of the new loan carefully.
- Compare the benefits of the new loan vs. your current loan.
- Ask your lender about anything you’re not sure of.
Knowing what to expect when refinancing your home will help the process go more smoothly. It’ll also make it easier to understand the terms of the new loan and the differences between your current loan and your new refinanced loan options. Remember the goal of any refinancing process is to put you in a better financial position now and in the future!
Have questions? Give us a call! We're always happy to help you fully understand your options.