Interest rates are lower than they have been in years and everyone seems to be refinancing their mortgages right now. Are you thinking about getting in on a slice of the action?
Ever since interest rates dropped, banks, brokers and underwriters are being completely overloaded with home mortgage refinances. Lenders used to say it would take about 30 days to refinance a mortgage, but now it is taking closer to 45 or even 60 days – just because of the sheer volume of requests they get each month. And, those time constraints are based on IF everything works out right. One missing document can jeopardize or delay a refinance, which could impact your interest rate.
Before you rush out to the loan office to take advantage of these low interest rates here are a few things you should know.
Prepare Ahead of Time
If you are thinking about refinancing, you should prepare in advance. Start to assemble all your paperwork and documentation as early as you can. You’ll need the last two copies of paystubs, W2s, bank statements and tax returns, so make sure you know where you can find those documents.
Once you lock in your rate, you’ll need to get all your documentation to your lender within a day – which is why you need to prepare ahead of time. The mortgage underwriting process is a first-come, first-serve, so you want to make sure your paperwork is at the top of the pile. Sign your paper work within a day of your interest lock and get your appraisal scheduled for as soon as possible.
Sometimes underwriters will ask for additional documentation once they get started on your loan documents. Make sure you stay in contact with your loan officer and be diligent about getting them whatever paperwork they need. As a borrower, you really need to be involved in the whole process and make sure that things are moving forward as they should be.
There will always be a waiting period during your loan process – there is nothing you or the lender can do about that. But even during that waiting time, don’t be afraid to connect with the lender to see if you’ve made any progress. Check in once or twice a week – not every day.
Know What to Expect
At the beginning of your refinance process, ask your lender what the time frame is and when you can expect to close on the loan. You should know when they expect to lock on an interest rate and have an estimated closing date before you get going on the paperwork too much.
Typically your interest rate is locked for 30 days. If you don’t close on the loan at the end of that time period you’ll have to lock in on a different rate or pay a fee to extend the rate. Lenders are taking a lot longer to close on refinances, so try to lock for at least 45 days.
Some smaller lenders are still offering 30-day closing refinances. Try to look beyond large banks and consider working with a smaller lender. Get quotes from several different lenders before you decide which company to go with. Always shop around and compare prices. Sometimes when big lenders get really overwhelmed they will raise their rates to help slow down applications. Plus, sometimes small companies can offer you help and services that the big guys can’t.
Refinancing a mortgage shouldn’t be a super stressful time. Sure you have to collect a lot of documents and you’ll feel like you’re signing away your life, but if you choose the right lender and prepare ahead of time then your refinance should be a breeze.