Once the homeowner has investigated all of the available lending options and has selected the lending institution offering the most affordable refinancing options, all of the documents the lender will require need to be put together to start the refinance process. This will be the relevant information regarding not only the property to be refinanced, but all the documentation regarding the borrower’s financial circumstances as well. Some will come from the borrower’s own files and records, most pertaining to the existing mortgage, and the rest will be requested from various agencies by the lender with the borrower’s authorization.
Having all of the required documentation on hand prior to negotiating with a lender is necessary to move the entire refinancing process forward with minimum delay. Generally, most of this documentation is the same as what is provided at the time of the original mortgage loan application process, but if a certain amount of time has transpired since then, lenders will want to rebuild the application file from scratch in order to re-verify the information.
Assets, Income, and Employment Records
Every refinance lender will request income verification from the borrower in order to proceed. Such documents may include wage payment stubs going back a few months, W-2 forms and tax returns for the preceding two years, as well as employer references and contact information to verify employment and job stability for at least two years. If a borrower is self-employed, they will have to provide tax returns for the two preceding years, along with profit and loss statements.
Any other forms of income sources will also be needed for verification, including pension, dividends, rental income, as well as child support documentation and alimony. A borrower will also need to supply bank statements for any checking or savings accounts, IRAs and 401Ks, possibly even records for mutual funds, stocks, bonds and other securities. Borrowers in possession of substantial stock portfolios, savings or other investments present far less risk to the lender, indicating an ability to maintain mortgage payments if they are temporarily unemployed.
Homeowner Insurance Policy, Title, and Deed
In addition, the existing homeowner’s insurance documents will need to be brought in to verify that the existing policy is in effect and that there is adequate coverage on the residence. Along with this will be copies of the recorded deed on file, the abstract, the land survey, current title report, and the required title insurance documentation for the necessary legal descriptions of the property and its owners. Most of these documents will be readily available from the original loan provider, which can speed up the entire process should that same lender be considered for the new refinancing.
Liabilities and Credit History
Last but not least, the lender will request to gain access to the borrower’s credit reports via written authorization from the borrower. This will give the lender a complete credit history of payment records and total amount of liabilities the borrower has under current obligation, their credit scores, and to evaluate what type of refinancing program they are qualified to apply for. There are also certain lenders who provide a fast-tracked refinance process for borrowers with significant equity in their home and top-tier credit ratings.
Because the original appraisal done on the existing property will have gone beyond the required 90 day time-frame to still be valid, some mortgage refinance requirements will stipulate that a new property appraisal needs to be performed in order to confirm the current market value of the property for the lender. This of course will establish the amount of funds the lender will endorse for approval. Generally, this appraisal is ordered by the lender through a contracted agency after the loan application has been submitted, and the expense is paid by the borrower when the appraisal is completed.
Whatever the financial necessities or motivations for seeking refinancing on an existing mortgage are, whether it be cutting the monthly expenditures, extending the loan term, changing the loan type, or just freeing up that equity, this information is a valuable tool for reaching that goal. Regardless of which lender is selected to begin the negotiations, the refinancing process can be expedited by putting together the necessary documentation beforehand. In the end, saving both time and money will be the most desirable outcome, for both the lender and the homeowner, if all the pieces of the refinancing puzzle are in the same box.