How Does Refinancing Work?
How Does Refinancing Work?
What is a refinance and how does this process work? A refinance is a replacement of the existing loan obligation with a new loan with different terms. The most common type of refinance is a mortgage.
If interest rates drop by 1 or 2%, it may be worth a refinance of your old mortgage. Reasons to refinance include:
Reduce monthly mortgage payments.
Reduce loan interest rate.
Pay off your loan faster by shortening loan terms.
Provide funds to consolidate accrued debts or for major expenses.
If a homeowner encounters one of these situations, it is well worth the refinance.
A refinance is very similar to the initial steps of the mortgage and has the same closing costs.
Your lender is not required this time to give you a good faith estimate. Always ask for one before making the decision.
Steps in a mortgage refinance
Homeowner completes application and the loan officer obtains pre-approvals.
Homeowner looks at different options and makes his choice of mortgages.
Required paperwork is then submitted to process the loan.
The loan officer sends the loan disclosures to be signed and returned.
An appraiser is called and scheduled for the home appraisal.
Payoff statements are ordered for all mortgages to be paid with refinance.
A title search is ordered.
The appraisal and title search are returned.
The loan file is completed by officer and submitted to processing department.
Processing department reviews the loan and obtains incomplete information.
Processing department submits file to underwriting department.
Underwriters review file and request stipulations for final approval.
Underwriters send stipulations to processing department and loan officer
Loan officer may ask homeowner for additional information per stipulations.
Homeowner provides information to loan officer
Loan officer forwards this information back to underwriter.
The underwriter approves the refinance loan.
A closing date is schedule
Final loan packet is sent to closing party such as attorney, Title Company, etc.
Homeowner provides ID, signs the loan and is given copies
A 3 day rescission period begins in which a borrower can cancel his loan. If this does not occur, the current mortgage is paid off, the title is recorded and the homeowner (borrower) is provided with finds through the refinance.
The loan is closed.
A refinance may be most beneficial to a homeowner with the right set of circumstances. For further information on the refinance process, ask your lender.
Categories: Buying
Tags: How Does Refinancing Work Steps in a mortgage refinance
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