Mortgage Refinance Process: Steps, Costs & Requirements

Answer

Mortgage refinancing replaces your existing home loan with a new one—typically at a lower interest rate or on different terms—to reduce monthly payments, switch from an adjustable to a fixed rate, or tap home equity for cash.

Here’s a step-by-step outline of refinancing your mortgage:

• Define your goals: Decide if you want a lower rate, shorter term (e.g. 30‑year to 15‑year), cash‑out option, or to eliminate private mortgage insurance (PMI).
• Check eligibility and credit: Lenders look for credit scores of 620+ (qualifying for best rates often requires 740+), debt‑to‑income (DTI) below 43%, and at least 20% equity in most cases.
• Compare lenders and rates: Request loan estimates from 3–5 lenders, comparing interest rates, APRs and closing costs. Use resources like CFPB’s Loan Estimate guide.
• Submit application: Provide income documents (W‑2s, pay stubs), asset statements and proof of homeowners insurance. Expect a credit pull and application fee (often $75–$200).
• Get an appraisal: Lenders require an appraisal to confirm current market value; fees typically range from $300 to $700 and take 7–14 days to complete.
• Underwriting and approval: Underwriters review your file, verify documents and issue a commitment letter outlining final terms and closing costs (usually 2–5% of loan).
• Closing: Review closing disclosure at least 3 days before signing. At closing, pay any fees not rolled into the loan and sign new mortgage documents to finalize the refinance.

Most refinancing transactions close within 30–45 days. Rates fluctuate daily, so locking your rate promptly—once you compare options—can protect you from market swings. Borrowers are recommended to verify state‑specific requirements, since disclosure rules and title processes vary across states.

Refinancing can lower long‑term costs or speed up equity build‑up, but closing fees and resetting your amortization may extend your break‑even period. It’s advisable to consult a licensed mortgage professional or financial advisor to weigh costs, savings and timing before proceeding.