The Mortgage Refinance Process Explained

Reader Question: “Like a lot of homeowners, I want to refinance my home to take advantage of the low interest rates that are available right now. But I’m not sure how the process works and, quite frankly, find it a little intimidating. Can you offer a quick overview of the mortgage refinance process so I’ll know what to expect?”

It’s natural to be intimidated by things we don’t understand. And this goes double for financial topics like this, where there’s a lot of money at stake. Hopefully, after reading this response, you’ll understand the refinance process so well that you never feel intimidated by it again.

Actually, I’m going to give you a brief overview of the steps involved in the process, and then link to a more in-depth article that we just put online.

Let me start by saying this. The mortgage refinancing process is very similar to what you went through when you got your original home loan. You will apply for the loan through a lender, your finances and credit score will be reviewed, the home will appraised the the lender’s appraiser, and — if all goes well — you’ll be approved for the refinance and your closing debt will be set.

I recommend reading an article I just put online yesterday, which explains the process I’ve just summarized in much greater detail. You can read it here:
How to Refinance Your Home Mortgage

Given the current state of the economy, you might want to start this process by finding out what your home is worth. By reviewing data from recent comparable sales in your area, you can get an idea what homes are selling for. There are many websites online today that can help you with this. Just do an Internet search for the phrase “find house values,” and you’ll see what I mean!

Property values have dropped in many cities across the U.S. In some places, like California and Florida, they have dropped significantly. Because of this, a lot of people are upside down in their mortgage loans — meaning they owe more than their homes are worth in the current market. If this has happened to you as well, then the inner working of the mortgage refinance process are a bit of a moot point. You generally cannot get a refinancing loan when you owe more than your house is worth.

So for starters, you should find out (A) how much you owe on your current mortgage and (B) what your home is worth in the current market. Based on your findings, you can then move on to the other steps in the refinancing process. And this article will help you get started with that.

Filed under: Refinance Questions