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Refinancing can open up opportunities for homeowners to cash out on equity, reduce monthly mortgage payments, or renegotiate the interest rate on their home loan. However, the paperwork and knowledge needed to navigate a refinance can be monumental, and the process can easily become overwhelming.
We wrote a whole blog covering the full refinance process, read it here!
We’ve compiled an extensive checklist of documentation that you as a homeowner will want to prepare ahead of beginning your refinance process. Having all of this paperwork in order can help streamline the process and make refinancing a less stressful and more exciting process.
Homeowners will want to prepare their documentation ahead of time and should know that requesting paperwork from the city and financial institutions can take up to a few weeks. If you are applying for a mortgage with a spouse, you can pool resources and get better interest rates. However, if your spouse has a low credit score or a higher amount of debt, you may need to apply as an individual.
If you apply together, note that it may be best that both of you collect all individual paperwork for the requirements below.
One of the first things you’ll likely need is your own verified personal identification. If you are a U.S. citizen, bring a valid driver’s license to appointments with lenders and be ready to provide your Social Security number.
Pull together any paperwork detailing your current mortgage to have it ready for your lender to verify. This includes the deed, deed-in-trust, and all of the details of your mortgage cost, interest rates, and other fees.
To feel confident that the terms of your new loan are conducive to your personal financial situation, lenders will want to see your proof of income. Be prepared to show records of pay stubs for the past thirty days at a minimum.
Most Lenders will pay close attention to your current debt situation to help discern your ability to make payments and stay above water. You will want to collect paperwork detailing the history and current situation of any debts, including your mortgage, student and auto loans, credit card balances, and home equity loans.
Lenders will pull your credit history to verify your credit score and any outstanding credit debt. If you’re submitting claims to more than one lender, consider providing your own copy of a credit report before they pull your credit, since multiple credit checks can result in lowering your credit score.
Whichever lender you choose will require an official credit check, but having a copy on-hand might help avoid preliminary checks before you’ve narrowed down your choices, which will help maintain your score in the long-term.
Be prepared for your lender to ask for a letter of explanation for credit issues. A request for a letter in no way bars you from being eligible for a refinance, but simply serves as a chance to explain missed payments, dips in credit score, or other shifts in your credit history.
Lenders will also ask for letters of explanation for applicants who have been living rent-free or who have large gaps in their employment. Be prepared to provide any additional documentation that might support what you write in your letter.
Lenders will need a copy of your most recent tax return along with tax forms you’ve received from employers or sent to employees and contractors (1099’s, W-2’s, and the like).
Your lender will most likely require a current appraisal of your home. This ensures that you aren’t asking to borrow more money than the home is worth, and takes into account any renovations and changes made to the property over the years. Lenders typically hire third-party appraisers, so it’s worth preparing to have a stranger walk in and around your home and property in preparation for the refinance.
Prepare to show documentation of your homeowner insurance coverage and history of past payments to verify that your policy covers your home. If the appraisal shows that your home is worth more than what it was at the start of your insurance, you might need to adjust the policy to cover the new value.
Your title insurance taken out with your first mortgage can cover any potential losses associated with the property’s past (fraud, unpaid taxes, etc.) that you might have not known about. The title insurance can also protect your mortgage lender; so they will want to see a copy of it as part of your paperwork.
In addition to proof of income, lenders will want to see proof of your assets. This entails paperwork detailing your savings account along with any CD and retirement accounts, stocks, bonds, and mutual funds, and information on any other investment property that you own.
Lenders will want to see that you’ve been able to make regular payments of the full amount towards your mortgage. This is typically reflected in your credit score, but you’ll want to be able to provide records of your payments and relevant bank statements if requested.
If you’re a business owner or a self-employed freelancer, prepare to show lenders a profit and loss statement. This shows not only the income you’ve made but explains serious purchases or reasons for lowered credit scores. If you are unable to provide income verification from another company, the profit and loss statement helps lenders know more about your income and the expenses related to your business.
If you’re refinancing as part of a divorce, prepare to bring proof of alimony that you are paid or owed as part of your proof of income. You’ll also want to bring documentation of any court order or judicial decree that’s relevant to the refinance as well.
If you're unfamiliar with the fees commonly associated with refinancing, read all about them here.
Each lender has slightly different requirements for what paperwork they’ll need to evaluate your refinance eligibility, so think of this checklist as a set of guidelines of what you might expect to be asked to provide. Make sure to include any additional paperwork that will help explain your financial history and show your ability to make on-time payments and pay off the closing fees associated with the refinance.
Our Mortgage Learning Center features blogs on a wide range of mortgage and refinancing topics.
Refinancing can be both exciting and overwhelming. If you are able to collect your documentation and prepare in advance for credit checks and income verification, it will be a lot easier to shop lenders and get a good understanding of your options. Use this checklist to apprehend what you’ll need to bring to have a smooth refinancing process.
A cash-out refinance is the process of taking the equity you have built in your home in the form of a cash deposit into a designated account or physical check. Many people choose this type of refinance to remodel their home or pay down debts, but the funds can be used however the homeowner chooses
Begin the refinance process today right here.
An example of a cash-out refinance:
The homeowner in this example would be able to refinance the $100,000 balance for up to 80% more in value. In this case, the homeowner could refinance their mortgage balance and receive the additional funds of $140,000 in cash at the refinance closing.
This article will outline when and how to navigate a cash-out refinance.
A cash-out refinance can be used in many different situations when you need to pull equity out of your home. It’s best to contact your lender to advise you if and when you are able to do a cash-out refinance. There might be waiting periods or other stipulations in order to qualify for a refinance.
Lenders usually recommend cash-out refinances to homeowners that have a substantial amount of equity in their homes. Most lenders will advise you to leave 20% of your home’s equity within the home during a refinance to avoid high interest rates as well as PMI (private mortgage insurance). Ideally, the homeowner seeking a cash-out refinance should have over 40% equity built in their home and should have a solid plan for what they intend to do with the cash in hand.
The purpose of refinancing is to get better terms on your loan payment, but with a cash-out refinance you may have the potential to receive better terms as well as gain cash in hand. When completing a cash-out refinance you are able to use the funds however you choose, below are a few common options that could help your financial situation.
A common reason homeowners choose to do a cash-out refinance is to remodel their existing home. Depending on the market, you could receive a lower interest rate compared to a credit card or personal loan on a cash-out refinance, plus the remodel can increase your home’s value.
Before you refinance, have a solid plan for your remodel. Meet with several contractors to get quotes and always factor in contingencies (things that could go wrong or end up being more expensive than anticipated!). Be sure to take in account the timeline for the project to be completed and when payments are due at different stages of the remodel. Once you have a plan, apply for an amount that makes sense with your renovation budget.
Refinance rates are very competitive compared to high interest credit card APRs. If you are able to make your credit card payments but are stuck paying high interest each month a cash-out refinance might be a good option.
The first step in considering this option is to gather all of your credit card debt information and carefully calculate the cost of paying them off at your current interest rates. Once you have the total, compare the cost to paying them off in a lump sum plus fees and interest incurred on your cash-out refinance. Using this information you will be able to determine the total savings on each option and you can then make an informed decision.
You may have debt from sources other than just credit cards. If you are looking to roll all of your debts into a single payment with more favorable terms, you could consider a cash-out refinance. Because this refinancing option allows you to use the funds for anything you wish, you can pay off student loans, credit card debt, or even an auto loan.
Be sure to weigh the total debt being paid individually vs rolling all of your payments into one refinance loan. Your refinance is directly tied to your home so only use this option if you are absolutely sure it makes financial sense.
Just like your first mortgage loan, a cash-out refinance has application fees, closing costs, interest rates, credit report fees, and will require an appraisal of your home. According to Freddie Mac, the national average closing costs on a refinance is around $5,000 or between 2-5% of your total refinance amount.
To get the best interest rates and save over the lifetime of your refinance, we recommend having a credit score in the “good” or higher range (670+ credit score). You can, however, still apply and qualify for a cash-out refinance with a sub-par score, but be prepared to pay a higher interest rate and qualify for less cash in hand.
Below are some hard costs associated with a cash-out refinance. Depending on your lender you may have more or less fees and the possibility of rolling your closing costs into your cash-out refinance loan
Item
Average Cost
Application Fee - This is the cost for someone to review your W2’s, bank statements, tax returns, and application.
$0 - $500
Credit Report - The lender will hard pull your to show you have excellent payment history and do not have too much debt.
The lender may or may not charge you for your credit report, this charge can be anywhere from free to up to $100.
Home Appraisal - Is required to inspect the condition and value of the home should you default on the loan.
$300 - $1000 Your appraisal rate is dependent on your home's location and the size of your home. Be sure to compare rates with local companies.
Title Search - Shows the lender that there are no outstanding liens, paperwork errors and more on your property.
$0- $200
Mortgage Points - This helps bring your interest rate down.
0-1% of loan per point
Underwriting Fee - Depending on your lender you may have to pay for someone to verify that you qualify for the loan. This is known as underwriting.
$0 - $900
The Cash-Out Refinance Process
If a cash-out refinance seems like a good way to restructure your loan and to gain access to the equity in your home, here’s how to get started
We also wrote an entire blog just about the refinance process, read it here.
Your refinance application will be similar to your previous mortgage application. Your lender will need to verify your identity, check your credit report, tax returns, W2’s or self employed income statement, bank statements, list of all assets, liabilities, investments, your current home insurance policy and verify any additional properties in your name.
Your lender will likely provide you with a checklist or form with all of the items needed and will contact you for any additional information and explanations
We put together a list of the documents you'll likely need to gather to refinance, read it now!
Your lender will ask you to schedule an appointment with a home appraiser to verify the value and condition of your home. This gives the lender insight on the current market value of the home and will have some weight in determining your cash-out value. In this same step your lender will submit the documentation for a title search on your home. This lets your lender know that you do not have any outstanding liens, unpaid property taxes, will discrepancies, and any other restrictions on your home.
If you qualify for a Property Inspection Waiver (PIW) you will be able to skip the appraisal portion of this step.
If the title and appraisal come back favorably, your lender will start the process of closing your cash-out refinance. A cash-out refinance can take a few weeks to finalize this process. During loan closing you will need to pay closing costs and possibly have the opportunity to buy mortgage points. On average a cash-out refinance will take between 30 and 45 days from application to closing.
Our Mortgage Learning Center features blogs on a wide range of mortgage and refinancing topics.
A cash-out refinance can be a great tool when used properly. This type of refinance is most commonly used for home repairs and upgrades but the homeowner is allowed to use the funds however they would like. Some tips when applying for a cash-out refinance are to make sure you have a good credit score, have a large amount of equity in your home, and you have a solid plan of what you want to do with your cash-out funds.
Consider this scenario. You bought a house several years ago, and at the time, you thought you got a pretty great deal. However, since you closed on your new residence, interest rates have plummeted, and you’re wondering how you can benefit from them. Does this sound accurate? If so, you may be in the right position to consider refinancing your mortgage.
People refinance their homes for many reasons, including snagging lower interest rates, reducing house payments, shortening the loan term, and withdrawing money from a house’s equity.
If you’ve been wondering whether refinancing could benefit you, this is the guide you need. We’ll cover the reasons you might want to refinance, the process you’ll have to follow, and all the questions you’re probably asking
We've created a refinancing checklist to help you through this complex process, check it out here!
Let’s start with a basic definition of refinancing. Essentially, mortgage refinancing is the process of swapping out your current loan for a new one with different terms. It’s a relatively simple idea, and people pursue it with a variety of different motivations. These are some of the most common.
One reason to refinance is to change your loan type. You might want to do this if you started with an adjustable-rate mortgage (ARM) and you’re tired of fluctuating interest rates and payments. A fixed-rate loan could give you the payment reliability you’re craving.
As we mentioned before, snagging lower interest rates is a common reason to refinance. Even if your new interest rate will only drop by half a percent, it’s still a savvy investment—as long as you see yourself staying in the residence for several more years.
If you’re in the financial position for it, refinancing to decrease the length of your loan—from 30 to 15 years, for example—can help you pay your loan off faster. A mortgage can be the most significant financial burden a person will take on in their life and paying it off can open up enormous possibilities for how you can spend your time and money. You may also be able to save additional money in the long-term by paying less interest on a shorter loan.
PMI can be a massive drag on your monthly payment, but refinancing can help you get rid of it. If you originally had to pay PMI as a requirement from your lender because you put down less than 20% on your house, you can have it removed in a refinance if your revised loan meets an 80% threshold in terms of your home’s value.
Deciding when to refinance a home or condo depends on so many different factors that are unique to you and your family. Considering the time and money involved with a refinance, it’s not something you should jump into without fully understanding that process and your motivations.
If you’re wondering about refinancing a condo, know that the process is largely similar to that of refinancing a house—though there are specific requirements your condo and association may have to meet.
Once a lender has determined that your condo is eligible for refinancing, the biggest thing is to look at how the process will benefit you and affect your financial goals. If you want to speed up your payoff timeline, cut your payments, or reduce your interest rate, for example, condo refinancing can be smart. If your reasons for refinancing are to borrow money from your home’s value to pay for other expensive necessities, a cash-out refinance can be a wise choice.
A condo refinance could leave you in a better place if you make sure to do it at a time when interest rates are low, or if you do it to support your other long-term goals, such as funding your children’s college education or paying off your loan faster.
Refinancing can affect your loan payment in both directions. Essentially, you can end up with a higher or lower monthly amount based on several different factors. You’ll just need to provide details such as the current balance of the loan and interest rate, how much time remains on the loan, and the new interest rate. There are many internet calculators that you can use to get an estimate of the new amount you’ll pay.
Refinancing can get complicated, and it’s normal to have a lot of questions about when to refinance and how it’ll affect your life. We’ll walk through some common questions below.
If your main goal is to lower your interest rate, wait to refinance until doing so would bring your interest rate down by no less than half of a percentage point.
Here are a few other optimal situations:
You may feel uncertain about refinancing during an evolving pandemic, but in reality, this may be a great time to refinance. The Federal Reserve cut interest rates to give the economy a leg-up, which means mortgage rates have also gone down
Read our blog all about how COVID-19 has affected the homebuying process here.
Has your credit score improved since you first bought your home? You may want to jump on a refinance as a better credit score can get you better rates and reduce the amount of money you pay.
If you have a USDA, Jumbo, FHA, or VA loan, you can also choose to refinance and potentially get a lower rate. One option to lower monthly payments for FHA loans is the FHA Streamline Refinance Program, which allows you to forgo income/credit score verification and appraisal. However, the streamline program has specific requirements, such as a certain amount of on-time payments, and limitations, such as the inability to pursue a cash-out refinance. You also won’t have the option to finance your closing costs, and you will be liable for mortgage insurance premiums.
What documents do you need to have to refinance your mortgage? Find out here.
Now that you’ve learned what’s involved in refinancing a mortgage, let’s move on to what refinancing looks like in practice.
Don’t start refinancing without knowing exactly why you’re making this switch and what the outcome may be. If you’re doing a cash-out refinance, know that your loan amount will go up. If you’re shortening your loan term from 30 to 15 years, know that your payments may be higher. Each option has a tradeoff, but there’s no need to fret about the cons if you’re secure in your decision.
How is your credit? You must know where you stand with your credit score before starting the refinance process since your credit score has bearing on the quality of the rates you get.
The higher your equity, the better chance you have of getting outstanding rates. Be sure to check your home equity as part of your refinance prep work by subtracting the amount you owe on your home from its current approximate value.
Don’t necessarily go with the first lender you find. Instead, shop around to find the best rates and compare fees from one lender to the next. The extra time spent researching could end up saving you money.
Depending on the particular mortgage lender you work with, you might have to have your home appraised before you can refinance. The cost of this appraisal will add to the amount of money you need to pay during the process.
There’s no such thing as a free lunch—or a free refinance. When you go to close on your loan, you need to take additional fees into account. Building the costs into the loan, when possible, can also make your loan or your rates higher, so consider whether this tradeoff is worth it in the long run.
Our Mortgage Learning Center features blogs on a wide range of mortgage and refinancing topics.
Is refinancing right for you? After reading this article, you should understand when the best times to consider a refinance are and how it can benefit you, from securing you a lower interest rate to removing the burden of PMI. When you’re ready, take the next step by reaching out to a reputable mortgage company to find out what kind of rates you could obtain.
Simple said- this is your company to use. No games or fast talk. Quotes back were quick and precise. Process is online, with minimal paperwork to sign and print. Closing was at my home and straight forward. Was done in 30 minutes. Couldn’t have asked for anything else, will use again in the future.
Great rate, super convenient application process. I worked with Alexander Rodriguez and he was fantastic - answered my questions quickly, made sure I understood what was going on throughout the whole process, and worked really hard to resolve some appraisal issues that took longer than expected to resolve. Other than that, this was a relatively painless process.
Simple said- this is your company to use. No games or fast talk. Quotes back were quick and precise. Process is online, with minimal paperwork to sign and print. Closing was at my home and straight forward. Was done in 30 minutes. Couldn’t have asked for anything else, will use again in the future.
From start to finish, I had a wonderful experience with this company for my refinance. They had the lowest closing costs by far! Even my friend who owns a mortgage brokerage couldn't beat them! The process of submitting all my documents through the online portal couldn't be any easier. They were very responsive to any questions. Everyone I spoke with were extremely friendly and very customer oriented. They clearly wanted to make sure you got the best deal possible. They even set it up to where a notary came to my house for closing, so I never had to leave home for any part of the refinance process. I'd do business with them again in the future. Highly recommend!
This was my first time doing a re-finance, so I did not know what to expect. Everyone at Interfirst Mortgage were great. They were very efficient and I could not believe how quickly everything was processed and closed. I got a much better rate, over less years and no closing costs, exactly as they promised at the start. My wife and I are very happy with the whole process thanks to Interfirst Mortgage.
I am so happy I found Interfirst to complete my mortgage refinance. They provided the absolute best rate combined with lowest closing costs, and I had shopped around and gotten quotes at half a dozen lenders before choosing them. The process was smooth and easy from start to finish. The online portal to apply and upload documents was user friendly. Crystal, our loan originator, was great! She was very professional and quick to respond and answer any questions. Jessica finished the underwriting so quickly. Overall, it was an amazing experience so if your shopping around for a lender don't hesitate to go with Interfirst. These kinds of things can be stressful, but you will be in good hands with them!
Alex and the whole InterFirst team were exceedingly professional - quickly addressing my concerns and helping me to get through all the steps required in obtaining a mortgage. It felt almost like a concierge experience, despite the fact that this was the standard offering on a fairly typical 10-year mortgage refinance.
Having purchased/refinanced a few homes and also working in the mortgage field, Dakota was excellent. His email replies were very quick and never beat around the bush. We were going to refinance with our current lender, but after many times of not getting replies or answers we requested, we looked elsewhere and found Interfirst and Dakota. Process was smooth and very quick. Thanks for your hard work and excellent customer service!
My refinance process was quick and went without a glitch. Boris was responsive, responsible, motivated, and very helpful throughout the process. Highly recommend.
APR is the annual percentage rate of a mortgage loan. It takes into consideration not only the interest rate, but includes all costs listed on the settlement statement, such as settlement charges, appraisal and lender fees, as well as discount points that come with the loan. APR is essentially the full cost of the mortgage. Knowing your loan APR allows you to compare loan offers that come with different interest rates and fees.
Equity describes the amount of value that you have in your home based on how much of the loan you have paid off. When you first purchase your house with an FHA loan and put down 3.5% as a down payment (or with a conventional loan at 15%), that down payment counts as equity. Note that as you make monthly payments, the portion that goes to paying off interest does not count as equity.
An interest rate is the amount of interest charged on a loaned amount of money to the borrower. Lenders determine interest rate by evaluating the risk that they take on by giving out the loan, looking at factors including the borrower’s financial history and credit score, the loan-to-value ratio, loan term, and monthly payment amounts.
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*Does not apply to third party fees and closing costs.
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