The one thing a mortgage lender most wants to know about you is whether you're going to pay back the loan. That's true when you apply to refinance, just as it was when you took out the original loan. Therefore, you can expect to go through most of the same paperwork, as the lender is going to have many of the same questions.
The lender naturally wants to know how much money you make, so expect to provide lots of documentation. Collect W-2s and tax returns for the past couple of years and pay stubs for the past few months. If you have income besides wages -- tips, Social Security, investments, self-employment income -- you need the paperwork that proves that income too. Your 1099 forms, for example, document payments from clients if you're self-employed, and they also record investment income. If you and your spouse are applying for the refi together, you both have to provide paperwork.
Asset and Debt
It's not enough to show the lender how much money you have coming in. Your lender also wants to know how much cash and other assets you have on hand, and what your debts are like. Bring in bank statements that cover the last few months -- include statements for all your accounts -- and be ready to explain any large transfers. The lender also wants you to document how much you owe -- credit card debts, student loans -- so he can calculate whether you can handle the monthly payments.
Lenders always want to know that the house is worth enough to pay off the loan if they foreclose. To get a refi, you have to pay for an appraisal showing the value of your home. Just like your original mortgage, the appraiser goes through your home, notes the features and flaws, and then researches the recent sale price of similar homes. She uses that information to set your home's value. Lenders prefer your refi loan be no more than 80 percent of the home's total worth.
If your original mortgage was insured by the Federal Housing Administration, you can cut out a lot of paperwork if you apply for an FHA-insured refi. If you apply for an FHA "streamline" refinance, you don't have to verify your income, your employment or your credit. FHA's goal is to make it easier for homeowners facing hard times to land a refi that will lower their monthly payments and cut their expenses.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.