Refinance Mortgage Tutorial

Refinancing a home is a simpler, shorter process than buying a home, because the home has already been selected and the buyer has already met at least basic credit and income requirements. However, the refi process is still fairly complicated and it's easy to get confused about what happens when during the process.

The purpose of this section is to provide a step-by-step explanation of the main steps that happen when you refinance a home. Once you're familiar with the basic steps in the refi process, then you can avoid getting lost in all the details and you can look at it with a "big picture" perspective. This helps eliminate a lot of potential stress and head-aches, and makes the whole process much easier.

Overview of the Refinance Process:

  1. Schedule an appraisal for the home (if required)

  2. Select a loan with a loan originator

  3. Complete a 1003 application

  4. Submit the loan to processing

  5. Address any issues that arise during processing

  6. Sign final loan docs at closing

Explanation of the Refinance Mortgage Process

1. Schedule an appraisal for the home (if required)

In general, the mortgage lender who will be lending the mortgage amount will want a current appraisal of the home before they make the mortgage funds available. The appraisal verifies the home's value to the mortgage lender, and ensures that the home has enough value to adequately secure the mortgage loan.

It is generally the buyer's responsibility to schedule and pay for an appraisal, though the mortgage company you're working with may credit the appraisal money back to you when the loan closes. Appraisals typically cost several hundred dollars, though the exact amount varies for each mortgage company and appraiser.

2. Select a loan with a loan originator

You will now need to select a mortgage loan and get formally approved. Whether the mortgage company you're working with is a mortgage banker or mortgage broker, the person who will help you select a loan will be a loan originator (also called a loan officer).

A loan originator's job is to help borrowers select mortgage loans that are suited to their unique situations. Good loan originators are familiar with all the different types of mortgage programs available in today's mortgage market, and the pros and cons of each type of loan program. To help select the right mortgage loan for you, a loan originator will request basic income, asset and debt information from you (and the coborrower, if applicable).

The loan originator will then check your credit, and use the credit information and the information you've provided to select several loan programs that would be suited for your situation. The final choice of which loan program you go with will be up to you, but the loan originator can be a helpful consultant if you're unsure about a program or if you've got any questions.

3. Complete a 1003 application

The 1003 (pronounced "ten-oh-three") is the standard, four-page mortgage loan application form. The purpose of the 1003 is to collect complete information about the borrower and co-borrower (if applicable), including employment information and asset/debt information. It also collects information about the property being purchased or refinanced, and the type of mortgage loan being used.

The 1003 is typically filled out over the phone or in person with a loan originator at their office. Some mortgage organizations also offer online 1003 that borrowers can fill out from their homes or any computer with Internet access.

4. Submit the loan to processing

After you have completed the 1003, then your loan officer will collect any additional documents that are required by the lender for the selected loan program (W2's, bank statements, pay stubs, etc.) and submit the loan to processing. During processing, the borrower and co-borrower's (if applicable) credit history, employment history and debt/asset values will be verified.

In addition, the property being refinanced will also have its information verified. To make sure that the property has enough value to secure the mortgage loan (s), the mortgage lender will typically request an appraisal for the property. If the lender request an appraisal, it will need to be completed during processing and before the loan funds. (If you scheduled the appraisal at the beginning of the refi process, then you shouldn't run into any problems here. If you wait to schedule the appraisal, it might hold up the loan from closing.)

5. Address Any Issues that Arise During Processing

If any issues arise while your mortgage loan is in processing, then the processor (the person responsible for taking the loan through processing) will contact you to help you address them. Typical issues include requests by the mortgage lender for additional asset or debt information.

For instance, a mortgage lender might want to see bank statements that show where a certain amount of money came from and how it was put into an account. It is important to respond promptly to any requests for additional documents. This is especially true if your mortgage rate has been locked or if you want to close by a certain date.

Note: It is also a good idea to refrain from making any major purchases while your mortgage loan is in processing. This is because anything that increases you debt could potentially hold up your loan application.

6. Sign Docs at Local Title Company

The last step in the refi process is to sign the final loan documents (or docs). This normally takes place at a local title company in front of a notary public. If you're going to be paying closing costs, then you'll want to bring a cashier's check for the total amount (personal checks are generally not accepted).

It is important to review the documents at this point and make sure that all the information is accurate. Things to look for include: mortgage type, interest rate and closing cost fees. You'll also want to make sure that your name and address (and the co-borrower's name and address if applicable) are accurate.

Once all the mortgage loan documents have been signed, then the loan can close and the loan money will become available. Loans typically close shortly after signing.

Note: For refi and home equity loans, it is required by law that the borrower (and co-borrower if applicable) have three days to review the loan documents before the loan can close.


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Our refinance calculator can calculate whether it would save you money to refinance your existing mortgage loan (s).

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