Congratulations! You’re refinancing a home. Depending on the rate you were previously paying and today’s interest rates, you could be saving hundreds of dollars a month. However, the entire process can seem a bit intimidating, and you may be wondering what to expect when you’re ready to close on your new loan. Here is a general guideline of what the closing process looks like when you are refinancing your mortgage.
Verifying Details From the Application
During the application phase, you are required to submit documents proving your income, assets, and funds. Your lender will also run your credit report and decide whether you are creditworthy. However, during closing, your lender may revisit those details. They need to make sure that you haven’t taken out any new loans or made other changes to your financial situation. If they believe that changes have occurred, they may ask for more supporting details or updated copies of the documents submitted during the application process.
Signing Disclosures and Processing
After the application process is complete and leading up to the closing, you will be sent the disclosure documents. These will include your loan estimate and disclosure of the fees that you will be paying. It is important to sign and return these promptly when you’re refinancing a home. Once you submit those disclosures, your loan is prepared for processing, and your escrow and title insurance are ordered. These are some of the final elements that need to be in place before you can close.
Locking in Your Interest Rate
When refinancing your home, you may choose to lock in your interest rate right away or let it ‘float’ to see if the rates go down. However, the loan cannot proceed and close until the rate is actually locked in.
Securing Homeowners Insurance
Before you can close on your loan, you need to provide your lender with policy information from your chosen insurance provider. This information should be provided promptly, as it is needed to calculate your final payment, interest, taxes, and insurance.
Doing the Appraisal
Once the preliminary approval is received and the loan documents have been submitted, an appraisal will be ordered on your home to ensure that it is worth what your lender is loaning you. Once the appraisal is complete, you may be required to make small improvements before the loan can proceed. Depending on the value of your home, your rates and fees may either slightly improve or lower. If either is the case, you will be sent new disclosure documents to sign.
Typically, at this point, if you are buying someone else’s home, there will also be an inspection for pests and structural issues. When you’re refinancing a home, those inspections don’t happen, but if the appraiser notices any issues in these realms, they can affect your home’s valuation.
Once your loan documents are processed, they will be sent to the underwriter for final approval. During this stage, the underwriters may request more documentation or letters of explanation before your loan is marked ‘clear to close’. They may send a ‘conditions’ or ‘contingencies’ list back to the processor. If that happens, you need to take care of the conditions before you can complete the process of refinancing your loan.
Signing and Paying Closing Costs
Now that every detail has been taken care of, you are finally ready for the actual closing. During the closing, you and the lender meet and sign all the final documents. If there are closing costs, you pay them during that meeting. However, some mortgages let you roll the closing costs into the loan so you pay them over time rather than at the closing.
Then, you’re done. You have finished refinancing your home, and you just have to sit back and enjoy the benefits of your new mortgage. To get started with refinancing a home, contact us today. At BrightPath, we work with homeowners in a variety of situations to help them refinance.