There are a lot of moving pieces to refinancing a mortgage. Here are seven tips to help you prepare and ensure everything goes as smoothly as possible.
1. Order HOA Certification Letter: If you have a homeowners association, get your HOA certification letter early. Lenders require this as part of the process, and HOA’s can be slow to provide this. By having a copy in hand, you can make the process move quicker.
2. Double strap your water heater: If double strapping your water heater is required where you live, make sure this is taken care of before your appraiser comes out. If you don’t meet your local requirements by the time of your appraisal, the appraiser will have to make a second visit later on to confirm you’ve addressed the issue, and you’ll most likely end up paying for the second trip.
3. Check your detectors: Make sure your carbon monoxide and smoke detectors are hooked up and functioning. More than half of the states in the U.S. require them. Also make sure your batteries are installed and working. If the appraiser can’t get the carbon monoxide detector to work, you might have to bring them back out once you’ve addressed the issue, which means paying for another visit.
4. Gather your pay stubs: This can be surprisingly difficult in the digital age, where direct deposits have eliminated the need for paper pay stubs. Lenders will require anywhere from a few months to two years of pay stubs, so having them handy will make your refinance process go much more quickly.
5. Gather your tax returns: This is another request that is common for most refinances. Most lenders will require you to provide your most recent two years’ tax returns, as well as the tax returns for anyone else on the loan. Gathering these ahead of time can help keep things moving.
6. Available cash: When you refinance, your Loan Estimate will call out the estimated closing costs for your new loan, of which you can finance or roll into your loan amount. But there could be other cash requirements – from property taxes and insurance payments to maintenance or other home-related updates. Having cash on hand to address anything that comes up will help avoid any last minute scrambling.
7. Avoid big purchases and opening new credit accounts: The creation of any credit accounts after your mortgage application could complicate the process. While you’re trying to close your home loan, it’s good to avoid the following:
- Taking out a loan to buy a car or motorcycle
- Opening new credit card accounts
- Applying for personal loans
- And the like
You should also avoid making any large purchases on existing credit lines – this could change your credit score, debt to income ratio, or a number of other things that helped you qualify for your loan.