Paperwork is an important part of establishing ownership of a house. You sign papers to transfer ownership, but you also sign documents to protect the financial institution lending you the money to purchase the house. You’ll go through the same closing process with a refinance, but it will be a streamlined process and, if the lender allows, you may even be able to choose the location of the meeting.
TL;DR (Too Long; Didn't Read)
Lenders require signed paperwork before a refinance can be completed. It's a simpler process than when you initially closed on the house and requires a less formal closing meeting.
Refinance Closing Process
When it comes to refinance funding, the calendar is important. You’ll need to have been in your home for a specific timeframe, mostly to ensure you’ll save enough money to make it worth paying closing costs. Once you’re ready to pursue refinancing, though, the lender will still require you go through an approval basis, and, if funding is denied after closing, you’ll have to decide whether to retain your original loan or seek refinancing with a separate lender.
Although a closing meeting is still required when you’re refinancing, it is an abbreviated version of what you went through when you initially closed on your house. In some cases, a refinance closing can even be held in your home. Even if you’re required to meet at the lender’s chosen location, you’ll find that the process is far less painful and involves fewer people.
Preclosing for Refinance
When you want to refinance your home, the first step is usually to contact your lender. Unless funding is denied, you’ll receive a loan estimate within three days. This will show you exactly how much you can expect to pay in fees to allow you to decide if it’s worth it to proceed.
At that point, you’re only preapproved for your mortgage refinance, so you’ll need to supply any documents the lender requests, including proof of income. Before the lender will confirm your approval, your home will have to be reappraised to confirm its market value. At that point, your lender will officially approve you so that you can both proceed to the refinance closing meeting.
What to Expect at Closing
The last step on the refinance funding calendar is the closing meeting. Three days before the appointment, your lender is required to send you something called a closing disclosure. This official document details the terms, loan amount, estimated monthly payment amounts, all the fees you can expect to pay and the conditions of your closing. You’ll need to review it for accuracy and bring it to the meeting.
Just as you can have funding denied after closing as a borrower, you can change your mind after closing, as well. This is called the right of rescission, and it lasts three business days after closing. Your lender will have to refund any fees, and you will be required to repay any money you received.
The Day of the Meeting
Once the closing on the refinance funding calendar day arrives, you’ll need to make sure you bring all the documentation necessary. You should be prepared to pay the closing costs, which may mean transferring some money in advance. Your fees are detailed on the closing disclosure but check with your lender on details of how this payment will need to be made.
As you head out for your refinance closing meeting, make sure you have all the paperwork you’ve been given during the closing process. You may have to look up something and having it handy will make things go more smoothly. At the closing meeting, you’ll be asked to sign a final closing disclosure, your deed of trust or mortgage and the promissory note. You’ll also sign paperwork to set up an escrow account for paying your property taxes and homeowners insurance premiums.
- GoBankingRates: What to Do If You’re Denied Mortgage Refinancing — and What It Will Cost You
- American Financing: Closing on a Refinance: What to Expect
- Citi: The Refinance Application Process
- The Mortgage Reports: Final Approval From the Underwriter: What Happens Next?
- FHA.com: Mortgage Closing
- Chase.com: Closing Disclosure
- Bankrate: Glossary
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.