Refinancing – Overview of the Lending Process


One of the questions that I receive most often is “What will this process be like?”

Here is an overview of a typical refinance process:


Step 1 – Check the terms of your current mortgage

The first step you should take is to look at your current mortgage and determine the following:

  1. Current loan amount ___________________
  2. Current interest rate ___________________
  3. Number of years remaining to pay _________
  4. Breakdown of each monthly payment:
    1. Principal amount: ________________
    2. Interest amount: ________________

You also need to know why you are refinancing:

  1. Lower monthly payments?
  2. Cash out for other bills or debts?
  3. Shorten the term of your mortgage?
  4. Lower interest rate?

Step 2 – Talk with a trusted lender

Make an appointment or call a trusted lender to discuss your plans. A competent lender will:
– Check your credit and offer suggestions about how you can position yourself favorably to get the best possible interest rate
– Discuss your current income and assets
– Notify you of best mortgage programs available for your specific situation
– Help you calculate your total monthly payment based on current interest rates
– Discuss closing costs and down payment and ways to keep costs low

CAUTION: Be careful if you are considering working with an online lender. While many are legitimate, you may feel safer providing sensitive personal information to a local bank or mortgage company with a trusted reputation. The ability to meet with your lender face to face provides many advantages including accountability, mutual understanding and flexibility.

Step 3 – Position yourself to apply for your mortgage

At this point you may need to:
– pay down outstanding debt
– correct inaccurate credit report entries
– finish any unfinished major projects in your home
Your loan originator will be able to help you determine what needs to be done to put you in the best possible position to refinance your mortgage with the best possible terms.

Step 4 – Apply for a mortgage

Whether you meet in person or apply online, your lender will guide you through the application steps.

Click here for our: Application checklists

Step 5 – Bank appraisal of home and mortgage approval

Your lender will order an appraisal to determine the value that they will lend on. This inspection and report must be ordered by your lender and will typically be scheduled with the listing realtor. You will receive a copy of the appraisal report when it is complete (usually 1-2 weeks later). TIP: You will typically be charged by your lender for the appraisal unless they have already covered the cost with an application fee. Talk with your loan originator about timing of the appraisal order.

By now your lender has had a couple of weeks to run credit and background checks and verify your employment and funds for closing. You will receive an initial approval for your mortgage once an underwriter has reviewed your mortgage application. This approval will normally be subject to a couple of clarifications regarding your credit, income and funds on deposit. It may also be subject to the complete appraisal report. Work with your loan originator or their processing staff to provide what they need for full approval.  Always provide full documentation requested (all pages), and try to be as rapid and thorough as possible with your responses. Most requests are non-negotiable and must be satisfied in order to receive full loan approval.

Step 6 – Finalize and review closing numbers and details, schedule closing

Your lender will provide a closing disclosure at least three days prior to your closing. This disclosure will list all of the costs you should have to pay at closing. As soon as you receive this notification, it is a good idea to contact your lender to discuss this disclosure and what your final amount will be to bring to closing.

TIP: Most title companies will require certified funds at closing, and in many states you will be required to wire funds to the title company. It is best to inquire about closing funds requirements as early as possible to ensure a smooth closing.

Step 7 – Go to closing, sign papers, and CELEBRATE!!!

At closing, you will review, approve, and sign the necessary paperwork to finalize your new mortgage. Expect this meeting to take 1-2 hours to complete. Once you are done with closing, there is a three day waiting period for most refinances before the new loan will go into effect and you will receive any cash back at this time.

Helpful links:

Refinance checklist

Refinance calculator

If you are interested in discussing a possible purchase or refinance, give me a call at (630) 330-1334.