How to Refinance Your Mortgage Step by Step

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

There are several steps to consider if you want to refinance your mortgage. These include determining your refinancing goals, checking your credit score, considering and narrowing your options, organizing paperwork, making an application, having your home appraised, and finally, closing the deal.

How to Refinance your Mortgage

Many Americans refinance their homes each year, and it’s no surprise — there are many advantages to refinancing your mortgage. Most people refinance to get a lower payment rate on their houses. The refinancing process seems intimidating to many, but it’s all possible if you take it one step at a time. Below, we’ve put together a step-by-step guide to refinancing your mortgage.

Get a Home Loan or Refinance Your Mortgage

Steps to Refinance your Mortgage

1. Determine your Goals

The first thing to do when embarking on refinancing your mortgage is to determine why you’re taking this step. Your goal will inform the rest of the decisions that you make in the process. Is the goal to have a shorter loan term? A lower interest rate? These are some goals for most refinancers! However, some also want a payment plan that frees up more short-term cash. Before you get started refinancing, you must know what your goal is so you can choose the plan and the lender that fit your needs and your target rates.

2. Check your Credit Score

Having a good credit score is critical to being approved for your dream refinance plan. Just like with any other loan, lenders need to know that you’re in good credit standing so that they can lend to you in confidence! So, it’s paramount that you know where your credit stands before you approach a lender. If you check your credit score and realize that it’s not as high as you’d want it, take some time to take steps to improve your score before you attempt to refinance your mortgage.

3. Consider your Options

Now, it’s time to shop around for the lender that best suits your refinancing needs and will help you to achieve your goals. Many potential refinancers make the mistake of spending too little time comparing options and end up missing out on the perfect deal. Spend considerable time reaching out to lenders and narrowing your options. Remember — each lender’s fees, closing costs, interest rates, payment terms, etc., will differ, so you’ll end up spending a few time options.

Get a Home Loan or Refinance Your Mortgage

4. Organize your Paperwork

Now that you have a lender in mind, it’s time to start gathering the paperwork you’ll need once you decide to submit a refinance application. Gathering paperwork is another daunting element of the process, but the paperwork requirements are similar across the board if you want to refinance your mortgage. Your lender is going to require proof of income, tax returns, title insurance and homeowners’ insurance documents, statements of assets and debts, and other documents you can read about in this article. It’s best to gather these documents before committing to a lender as you might need a bit of time to gather everything you need.

5. Make an application

When you have gathered all your paperwork, it’s finally time to approach a lender and make an application to refinance your mortgage. When you apply for mortgage refinancing from the lender you’ve selected, you’ll receive a loan estimate that gives you an idea of your rates and fees. You might be given the option to lock your rate — meaning there’s a guarantee that it won’t change — or float it — meaning that you could end up with a rate that is lower or higher than the estimate. During the application process, you’ll also submit the paperwork that you’ve gathered.

6. Have your Home Appraised

Your lender will arrange for an appraiser to visit your home to determine its worth. This will help to determine the lender’s rates, and it might affect the loan estimate you received before.

7. Close the Deal to Refinance your Mortgage

After the appraisal process, you are well on the way to refinancing your mortgage. Your lender will supply you with closing documents that fully outline the fees and rates associated with your refinancing. Be prepared to spend some time reading over these documents. You can also have an attorney or experienced in the field read over the paperwork with you to clear up anything that is unclear. After the closing documents are signed, your lender will re-verify your information and pay off your old loan, and your home will have been refinanced! Be prepared to pay off closing costs that are generally associated with refinancing, such as attorneys’ fees.

Refinance your Mortgage: Conclusion

Now that you are clear on all steps to take to refinance your home, you can start the research to compare the different loans and lenders to ensure you get the best deal possible for your particular case.

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