A Step-by-Step Guide to Mortgage Refinancing to Share With Clients and Prospects

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March 7, 2023 | By RGR Marketing Blog

Mortgage Refinancing Made... Easier

In the mortgage business, it’s never too early to start thinking about what the end of the year will look like. And while interest rates climbed quickly last year, most market analysts are predicting that the rates will calm down some as 2023 progresses. This means that all those refinance prospects who cooled off last year will most likely start heating up again.

So, now is the time to start preparing for the hopeful uptick in refinance business. Here’s a handy step-by-step guide to mortgage refinancing that you can share with your clients and prospects to help ensure that they are ready to go once the rates hit their desired targets.

What Does It Mean to Refinance a Mortgage?

Refinancing a mortgage is essentially trading in one’s current mortgage for a new home loan. The new loan has a new principal and a different interest rate than the original loan. Once the refinance is approved, the lender uses the new loan to pay off the old one.

Reasons to Refinance a Mortgage

Homeowners refinance their homes for a wide range of reasons, so there are a variety of different refinance products available for them to choose from. For instance, if a homeowner just wants to save money on their home by refinancing at a lower rate, then they can apply for a standard refinance. But if they want to access their home equity to pay for a home renovation or other large expense, then they can apply for a cash-out refinance. Refinancing a mortgage can also be used to remove another person from the mortgage, which often happens in the case of divorce. Or it can be used to add someone to the mortgage.

Understanding the Mortgage Refinance Process

On average, it takes anywhere from 30 to 45 days to close on a refinance because when a homeowner wants to refinance their mortgage, the process might be a little less complicated than applying for a first home loan but it generally follows a lot of the same steps.

Here are the steps included in refinancing a home loan.

Step 1: Prepare for the Refinance Application Process

When applying for a mortgage refinance, the lender will require all the same information that the homeowner gave their lender when they originally bought their home. The lender will need to look at the applicant’s income, assets, debt, and credit score to determine if they meet the requirements to refinance and can afford to pay back the loan.

Some of the documents a lender might require include:

Two most recent pay stubs
Two most recent W-2s (or two years of tax returns if self-employed)
Two most recent bank statements
Homeowner’s insurance policy and title insurance policy
Identity verification documents

If the home being refinanced is in a community property state, then the lender may also need the spouse’s documents if the borrower is married (regardless of whether the spouse is on the loan).

Step 2: Research Lenders

A homeowner doesn’t need to use their current lender for their refinance if they don’t want to. In fact, it pays to shop around to find a lender that can provide them with the best rate and terms. This could wind up being their current lender, but it pays to find out for sure.

Some things to look for when comparing different lenders include:

How well the lender communicates
Their interest rates and terms and conditions
Positive or negative reviews and testimonials posted online
Their customer service rating
How long their refinance process typically takes

Step 3: Complete the Loan Application

After settling on a lender, the homeowner will complete and submit their loan application. The application process typically takes a few hours if the borrower has all the required documents prepared, then it can usually be completed quicker.

Step 4: Receive the Loan Estimate

After the loan application is submitted, the lender will have three business days to provide the applicant with a loan estimate. The loan estimate is not an approval, but rather it simply provides the borrower with important information should the loan be approved. Such information can include:

Estimated interest rate on the new loan
Approximate monthly payment
Estimated closing costs
Estimated cost of taxes and insurance
Penalties for paying off the loan early (if applicable)
Negative amortization (if applicable)

Once the applicant receives their loan estimate, they can decide whether to move forward with that lender or to keep searching.

Step 5: Get the Home Appraised

In some cases, a home appraisal may be required before a new loan can be underwritten unless the loan being applied for is a VA loan, a USDA loan, or an FHA loan. This is a more common occurrence with older homes as their values are most likely to be higher than they were when the original loans were approved. The home appraisal determines how much the house is worth, and if the property comes back with a low appraisal, it could negatively impact the terms and conditions of the new loan.

Step 6: The Underwriting Process

The underwriting process is what typically takes the longest time when applying for a refinance. Depending on different factors and circumstances, the process can take as long as a few weeks or it can be completed in a quickly as five days. During this process the lender thoroughly reviews the borrower’s financial history to make sure they can afford the new mortgage and that they have the resources and income to pay back the loan in full and on time.

Step 7: Review the Closing Disclosure

When the underwriting process is complete, the lender will provide the homeowner with a closing disclosure. This document lists all the fees and costs that will be due at closing, along with information on the new loan, such as the updated monthly payment and APR.

Step 8: Close On the Refinanced Loan

The final step in the refinance process is to close on the new loan. After reviewing and agreeing to the new loan’s terms and conditions, the homeowner simply needs to sign on the dotted line to make it official. A typical closing generally takes a few hours, as the lender will go over the contract and its terms and conditions with the homeowner line by line.

Looking for Higher Quality Refinance Leads? Partner With RGR Marketing Today

RGR Marketing has more than 20 years of experience providing mortgage lenders with exclusive access to high quality, highly targeted mortgage leads. Unlike other lead gen firms, our leads consist of prospects who have shown recent increased interest in obtaining a mortgage or refinancing their current loans. This means they are close to making their decisions. Also unlike the leads you get from other firms, our leads are verified for accuracy and scrubbed to remove any duplicates, incomplete profiles, or invalid data.

Partner with RGR Marketing today and get connected with local refinance prospects. Our leads can help you improve your conversion results and set the stage for a more profitable 2023.

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Mortgage Refinancing Made... Easier

What Does It Mean to Refinance a Mortgage?

Reasons to Refinance a Mortgage

Understanding the Mortgage Refinance Process

Step 1: Prepare for the Refinance Application Process

Step 2: Research Lenders

Step 3: Complete the Loan Application

Step 4: Receive the Loan Estimate

Step 5: Get the Home Appraised

Step 6: The Underwriting Process

Step 7: Review the Closing Disclosure

Step 8: Close On the Refinanced Loan

Looking for Higher Quality Refinance Leads? Partner With RGR Marketing Today

Start making more
money today!

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Contact Us

Mortgage Refinancing Made... Easier

What Does It Mean to Refinance a Mortgage?

Reasons to Refinance a Mortgage

Understanding the Mortgage Refinance Process

Step 1: Prepare for the Refinance Application Process

Step 2: Research Lenders

Step 3: Complete the Loan Application

Step 4: Receive the Loan Estimate

Step 5: Get the Home Appraised

Step 6: The Underwriting Process

Step 7: Review the Closing Disclosure

Step 8: Close On the Refinanced Loan

Looking for Higher Quality Refinance Leads? Partner With RGR Marketing Today

Start making more money today!

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