Mortgage refinance checklist: Everything you need to refinance your home [PDF]

Erik J. Martin
The Mortgage Reports contributor

Take the guesswork out of refinancing

When refinancing a home, you want to know your refinance goal, find the best lender and product to achieve it, and get your paperwork together to make it happen.

It’s easier than you think.

As long as you know what to expect and come prepared, you’re likely to find a solid refinance deal and save a bundle over the life of your loan.

Compare refinance rates from major lenders. Start here (Dec 4th, 2021)

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The Mortgage Reports downloadable refinance checklist

Complete checklist of what you'll need to refinance your mortgage

Click here to fill the checklist out online or print it

How to use this refinance checklist

Our mortgage refinance checklist covers most of the bases. Learn what’s involved, and how to prepare properly. Being ready can simplify the process and provide better peace of mind.

Preparation is vital for a mortgage refinance. You have to figure out if it makes financial sense, learn the facts, and shop around.

Getting your paperwork in order is crucial, too. Tackling these steps will save you time and worry.

“For example, say you don’t have your current mortgage statement and terms in front of you when you apply,” says Jennie Jacobson, mortgage loan consultant with Orange County’s Credit Union.

“That means you have to estimate your figures [and] that makes it impossible to compare lenders or loan products accurately.”

Step 1: Should you refinance?

Is a mortgage refinance worth it? To help you decide, answer these queries:

What will a refinance accomplish? Maybe you want to pay off your mortgage debt quicker. Or you may want to lower your monthly payment. Perhaps you seek to tap into your home’s equity and pursue a cash-out refi to fund a home improvement project. Narrow down your goals.

Can I cover refinance expenses? The closing costs and fees associated with refinancing a mortgage can often equate to 3 to 6 percent of your outstanding balance.

How much longer do I plan to live in my home? “Before attempting a refi, you need to evaluate whether it will, in fact, save you money,” attorney Elizabeth A. Whitman says. She adds that a refi might be cost-prohibitive unless you plan to stay put for at least three years.

Can I show a consistent source of income? And can I count on this source of income continuing for at least three years?

Will I be penalized for paying off my current mortgage? Some mortgage loans apply prepayment penalty fees. If yours does, find out how costly this can be.

Step 2: Check your financials

Now it’s time to do your homework. Complete these tasks:

Check your credit score and history. You can obtain a free credit report through various online vendors, including “Do this months before attempting a mortgage refinance. And correct any errors you see in your credit report long before applying,” says Whitman. “Even making small changes on your report can improve your credit score and result in a better interest rate.”

Examine your most recent mortgage statement. Or find your original paperwork. Determine your current interest rate, unpaid principal balance, and maturity date.

Learn what your home is worth. Use free online tools from Redfin, and other sites that estimate your home’s current value.

Avoid applying for other types of credit. “Too many credit inquiries can result in a reduction of your credit score,” says Whitman.

Get refinance rate quotes from top lenders here. (Dec 4th, 2021)

Step 3: Collect the paperwork

Before you can request and compare refinance loan offers, you need the right records in hand. Gather these documents:

At least two recent pay stubs, if you’re a wage-earner

Tax documents from at least the last two years (W-2s if you’re a wage earner, 1040 tax returns with supporting schedules and forms for self-employed or commissioned applicants)

Recent asset statements (for bank accounts, retirement plans and investment accounts)

Document debts like child support that don’t appear on your credit report

Homeowner’s insurance declarations page

Divorce decree, if you pay or receive child support or alimony payments

Letters of explanation for any dings in your credit history or gaps in your employment

Award letter or proof of receipt of social security or pension payments

If providing printed documents, submit all pages, even the blank one at the back. If the first page says “1 of 4” on it, provide 4 pages.

Step 4: Shop around and ask questions

Compare mortgage rates and programs from several lenders (easy to do online). Then contact the most competitive lenders. Prepare to ask the following questions:

Can you provide a loan estimate (LE)? “Review this estimate line by line to verify the true cost,” says Jacobson. “Review the rate, APR, closing fees and other important details,” says Jacobson.

How is your refinance loan better than my current loan? “It rarely makes sense for a borrower to refinance unless the new mortgage rate is noticeably lower than the existing one,” Whitman notes.

How much interest will I pay over the life of this loan versus what’s left on my current loan?

What are the closing costs and fees involved? Do you offer a “no-cost” refinance, which rolls these costs into the loan in the form of a slightly higher interest rate?

What’s the maturity date on your loan? “Be cautious and consider long-term goals before extending your maturity date. For instance, consider a 58-year-old borrower with 10 years left on his mortgage. It might not make sense to refinance to a 30-year mortgage,” says Whitman. “Even though it may result in lower monthly payments, he could be paying this loan off well past retirement age.”

Will the mortgage fully amortize (be paid off) during its term? Or will there be a balloon payment at the end? “Say it’s the latter, and you intend to remain in the home after the loan is paid off. Then, you’ll need to refinance again or have cash available to pay the balloon payment,” cautions Whitman.

Will there be a tax impact if I refinance? (Most lenders tell you that it’s your responsibility to find this out, however)

Are the terms of this new loan subject to change in the future?

Step 5: Apply and make final preparations

Once you’ve narrowed down your list to a preferred lender, prepare for the following:

Complete the mortgage application (Fannie Mae Form 1003). Most of the time, you’ll sit with or speak over the phone with your loan officer, broker or processor. He or she will fill out the form, and you’ll sign the printed version (ask if it differs from the information you provided). “Also, read the details and anything you sign very carefully,” notes Jacobson.

Provide additional documents your lender requests. “And complete everything asked of you in a timely manner,” Jacobson says.

Stay in contact. “Find out who the loan officer is assigned to you. It’s important to have a point of contact between now and after closing,” adds Jacobson.

Prepare for the appraisal. “Before they can underwrite the loan, your lender will order an appraisal. You usually have to pay for this at the start of the process,” says Vincent Geraci, senior vice president and mortgage sales manager with Unity Bank.

Respond quickly to additional requests

“Once approved, the underwriter may require additional documentation or conditions. This will be provided in the form of a list,” Geraci says.

“Once your appraisal and title are received and considered acceptable, and you have satisfied any other conditions, the underwriter will issue a clear to close. A closer will then reach out to you to schedule your closing.”

Get started on your refinance

Refinancing is not simple, but it doesn’t have to be overwhelming. And the benefits can be surprising.

Get started with your refinance goals at the below link. Today’s rates are low, so it’s the perfect time to get rate quotes to find your best deal.

Verify your new rate (Dec 4th, 2021)