Refinance Checklist: The Basics
Before you refinance, make sure you’re properly prepared.
Documents you’ll need:
Mortgage promissory note
2 months of pay stubs
2 years of W2 forms
2 months of assets statements (e.g. checking, savings
Choose your refi type
Cash-in: Used to lower interest rate or change repayment terms in order to pay off the mortgage faster. Contributes to paying down the loan balance.
Cash-out: Use the equity in your home to put cash in your pocket. However, in the end you will pay more interest on the loan to make up the difference. Requirements for this refi type are more specific than those for cash-in refis.
Evaluate program terms
There are many refi programs, including conforming, non-conforming, conventional, USDA, FHA, VA and ARM.
For borrowers who are underwater on their current mortgage (i.e. they owe more than the house is worth), the Home Affordable Refinance program is an option. The HARP government program was created to specifically help underwater homeowners adjust their terms. However, only mortgages backed by Fannie Mae and Freddie Mac are eligible.
The program terms include interest rate and repayment period.
You can choose fixed-rate or adjustable-rate mortgage terms. Fixed-rate repayment periods are on the order of 10, 15, 20, and 30 years.
The adjustable-rate option can offer a variety of terms ranging from an initial fixed interest rate period from 1 to 10 years and is usually amortized over a 30 year period
Find a lender
Remember that you do not need to refinance through your original lender. Choose wisely, and beware of lenders who try to pull you in with suspiciously low rates. Check out their website, client testimonials, licensing and standing with the Better Business Bureau and other reliable references.