Refinance Loan Process
Completing your loan is a simple and straightforward process. As with any other application process, there are various stages that your loan must move through before your refinance loan can be funded. For residential mortgages, there are 5 distinct stages in the loan process:
- Prequalification: This is the process of identifying which refinance loan program best fits your individual needs and determining whether you qualify for this particular loan. The lender gathers information about your income and debts and makes a financial determination about whether you qualify for a new mortgage and whether it makes sense to refinance. Your information will be reviewed by an Automated Underwriting System (AUS) that will provide the lender with the necessary documentation needed for your loan pre-approval.
- Application: After you have decided that it makes sense to refinance your existing mortgage, you will complete a standard mortgage application. You will be asked to provide documentation to support your income, assets, and debts. The lender will also review all of the various fees and down payment options that are available for your desired refinance loan program. Your loan officer will also deliver a Good Faith Estimate (GFE) and a Truth-In-Lending Disclosure (TIL) within three (3) days that itemize the rates and estimated costs for obtaining the loan.
- Processing: After the lender has received a completed loan application and all of the necessary supporting documents, your loan file will move to loan processing. The loan processor’s goal is to put together a complete application package that is ready to be reviewed by the lender’s underwriter. To do this, the loan processor will review your credit report and supporting documentation to verify your employment, income, debts, and payment history. If there are unacceptable late payments, collections, judgments, or any other discrepancies, the processor will request a written explanation from you. The loan processor will also review the appraisal and survey and check for property issues that may affect your final loan approval.
- Underwriting: Once a file leaves processing and moves to underwriting, the lender’s underwriter will review your file for completeness and determine whether your application package meets all of the new lender’s investment criteria. If the Underwriter has questions or needs additional information to make a decision on your loan file, the Underwriter will add “Conditions” to your file and contact you to supply additional information. After all of the underwriting conditions have been met, the Underwriter can approve the loan. At this time, the Underwriter will issue a conditional commitment to lend, order title insurance, and schedule a time to close the loan.
- Closing: Closing refers to the event when your loan is “funded” by your Lender through a wire transfer to the closing agent, which is typically a title or escrow company. The closing occurs only after all underwriting conditions are fulfilled and the lender issues a full loan approval. The closing agent will disburse the funds to the previous Mortgage Note holder in exchange for the title transfer to your property as well as disburse funds for the payment of any fees, including origination fees. After closing, you are done and your mortgage refinance loan is complete!