When you refinance your mortgage, you are already a pro at closing on a loan. You did the tough part – buying the home. Now you just want to get a new loan, whether to take cash out of your home’s equity or to get a lower payment. This should be easy, right?
While it might be easier, no closing is easy. You still have hurdles you have to cross to get to the finish line, which means a new mortgage with new terms and possibly a little cash in your hands.
Here are the best ways to ensure that your process goes off without a hitch.
Don’t Make Any Changes After You Apply for the Loan
One of the biggest mistakes you could make is make any changes right before the closing. This pertains to your finances, income, and your job. In other words, don’t apply for new credit; don’t make any large purchase; don’t change your income; and don’t change jobs. Your lender is going to check each of these things again before you close on the loan.
You might think you are home free once you get the approval for the loan, but it’s not over yet. The lender will likely pull your credit one last time. If you applied for new credit, they will see the inquiries on the bottom of the credit report. This will raise a red flag and bring up a whole host of questions. They might also call your employer to make sure you are still employed and even ask for your bank statements to make sure nothing drastic changed there.
It’s best to just ‘freeze’ everything until you get through the closing. Then you are free to do as you wish with your finances, job, and bank accounts.
Bring an Attorney
Even though there aren’t sellers to deal with this time around, there is a mountain of paperwork to handle. Chances are that you won’t understand a majority of what you are signing, so it’s best to have someone there that does understand it. You may have your loan officer there, but having someone that is there to protect you could prevent you from signing something that you don’t agree with.
If you can’t bring an attorney, at the very least, have one ready to read the documents after you close. In a refinance, you have 3 business days after the closing to change your mind. If there is something in the documents that an attorney doesn’t like, they will discuss it with you. If it’s something you are not okay with, you have the right to rescind the loan within the first 3 business days.
Know How Much Money You Need
Even though you are not buying a home, you might still need to bring cash to the closing. Are you paying for the closing costs out of your own pocket? Then you will need cash. You may also need it if you plan to pay the principal down a little so you can have a lower payment.
Knowing ahead of time how much you need will help you prepare. You cannot bring cash or a personal check to the closing. You must bring a cashier’s check in the exact amount necessary to close the loan. Your loan officer will let you know what that amount is ahead of time, but you should prepare. You will have to show the lender proof of the funds, by having them ready in your bank account. They cannot be funds from someone else or another loan. You have to show the lender that you have had them for at least the last 2 months to use them.
Any funds the lender cannot source could cause a delay in your closing, so take this step seriously.
Closing on a refinance isn’t as stressful as the purchase of your home, but it has its moments. Make sure you are properly prepared for the process by knowing exactly what type of loan you applied for and what the terms should be. This way you can compare everything at the table and make sure there aren’t any surprises. Remember, you have that 3-day rescission period to change your mind if you change your mind.