You probably remember the stress of closing your home loan when you bought your home. If you are now thinking of refinancing, you’ll go through some of the same stress. While refinancing isn’t as hard as buying a home, you still have some hoops to jump through in order to get your loan.
Keep reading to learn the top tips for a smooth refinance closing.
Keep Your Financial Life the Same
Just like when you bought your home, your lender is going to check your qualifications right before you close on the home. This is in addition to the evaluations they did when you applied for the loan. The most common areas that they check include:
- Credit score
This means the lender will call your lender to confirm that you are still employed and that your income hasn’t changed. They will also verify your credit score to ensure that it hasn’t changed.
If you’ve racked up credit card debt, paid your bills late, or even opened new accounts, you could ruin your chances of closing on your refinance. Any of these actions can make your credit score fall, which shows the lender financial irresponsibly. The same is true if you don’t have the same job or your income dropped significantly. The best thing you can do is keep everything exactly the same as when you applied or the loan so that you can get through the closing easily.
Have Enough Money for the Closing Costs
Don’t forget about the closing costs on your loan. They won’t be as high as when you bought the home, but they can still be pretty costly. You need the money to pay for the lender fees as well as any third-party fees, such as title work, appraisals, or attorney fees.
Your lender will need to verify where the money comes from, so make sure you have an explanation for any large deposits. You’ll typically have to provide your lender with the bank statements from the last two months. Any deposits you made prior to that time will be considered seasoned and you won’t have to explain them. Any deposits after that point, though, that don’t coincide with your income will have to be explained and you’ll also have to provide proof of their origination. Lenders want to know that you didn’t secure a loan to pay for the closing costs.
Know What you are Paying
The lender must provide you with a Loan Estimate within 3 business days after you apply for the loan. They must also provide you with a Closing Disclosure 3 days before you close on your loan. Compare these two documents to one another. Make sure the closing costs are the same or at least are what you expected.
If you have any questions about a fee, make sure you ask now so that you know what you are paying. The last thing you want is to need more money than you have for the closing costs. Knowing ahead of time can give you time to ask questions, negotiate, or change any issues that may have occurred.
Stay in Contact With the Lender
Make sure you stay in close contact with the lender throughout the entire process. This way you are both on the same page the entire time. If you don’t stay in contact with the lender, you may miss an important detail regarding your loan.
The last thing you want is an unpleasant surprise right at the end of your loan. If the underwriter needs something yet you don’t know it, you may not be closing on your loan when you expected to be closing. Staying in close contact ensures that you know what is needed from you and that you provide it.
Refinancing your loan doesn’t require as much as work as it did when you purchased the home, but there’s still plenty of work to be had. You need to make sure that you are getting the loan you wanted and that you are as prepared as possible for the closing. If you want, you can bring an attorney with you to the refinance, but many people just have an attorney review the documents beforehand so that they know that they are in good hands.