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Mortgage Refinancing Process In Detail

A mortgage refinance is one way to help you lower your monthly mortgage payment.  Many people also use mortgage refinancing to be able to use some of the equity in their home to get cash for current needs or wants.  Let’s discuss some of the information about how mortgage refinancing works so you can be better prepared to make a decision as to whether this is a good fit for you.  

In order to start the mortgage refinance process, you will need to meet with a lender and qualify for a loan.  Some of the items you will need to see if you qualify are a government issued photo ID to prove who you are, the past 2-3 months of current pay stubs to verify your income and income and employment history, a list of your current assets, and a listing of your current debts.  The information you provide will be used to determine your current debt to income ratio, and if it is within the limits set by that particular lender, you will receive a pre-qualification notice. 

There are several different types of mortgage refinancing products that are available, such as a streamlined refinance, a cash-out refinance, or a Home Equity Line of Credit (HELOC).  You will need to discuss each of these with the lender in deciding which will be best for you.  Making a choice as to which type of loan is best for you is as important as determining which type of loan you qualify for. 

Once you are pre-qualified, you can move forward with a mortgage refinance.  Next, your home will need to be appraised to determine its current market value.  This value must be larger than the amount you owe on the home, or the loan will most likely be denied.  This is one of the biggest problems for people who have wanted to refinance over the past couple of years as home values have dropped.  If you find that your home's value is less than the amount you owe, you may be eligible for some of the government options that may force the lenders to refinance anyway, or to provide a bad credit mortgage in the case that your credit is poor. 

After you have qualified and the appraisal is complete, the underwriter with the lender will need to process and underwrite the loan.  You will then attend a closing at a local title company, where a title officer will have all the documents signed and filed and recorded.  As the borrower, you will sign the paperwork and agree to make the new mortgage payments.  After everything has been signed, it may still take up to 3 business days for the money to fund and pay off the old mortgage loan.  Once this has happened, you are under the terms of the new loan.  Mortgage refinancing can be a great tool for many homeowners to lower their monthly payments and save them money.