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The Skinny on Home Loan Paperwork

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What documents do you need to refinance your home?

Refinancing your home is a major decision and should not be taken lightly. This option should only be considered in the wake of a dire financial situation. In the event that you find yourself drowning in debt, overwhelmed by medical bills or being crushed by student loans, refinancing may be a viable option.

Credit cards often carry much higher interest rates than a mortgage. When credit card debt becomes too burdensome to meet the monthly payments, home refinancing to include the credit card debt can offer some immediate relief. While refinancing does increase the overall cost of the mortgage, it will offer an instant escape to the higher interest rates that you were paying on credit cards or other loans. Refinancing a home requires lots of paperwork and having the right documents will make the process fast and easy. Here is some information that will help you ensure that you are properly prepared with the right documentation.

Refinancing your home is a major decision and requires several important documents. Collectively, the information required will paint a comprehensive picture of your financial standing. The paperwork will also disclose the status of your current home mortgage.

During the process of refinancing your home, it will be required of you to give the lender access to your credit history and score. Your lender will retrieve this information on their own but you will be required to give them authorization to access these reports. For this required service, there may be a minimal fee added to the closing costs as part of the refinancing transaction.
In order to get a better picture of your financial standing, your potential lender will ask for documents verifying your proof of income. Pay stubs, bank statements and tax returns will be required documents so be sure to have copies of them ready. Most employers now offer their employees a way to download and print their pay statements online. In other cases, you may need to provide yourself ample time to request these documents from the human resources department at your place of employment.

The number of pay stubs required will vary by lender so you should expect to provide payment information for the previous two months. The lender will likely request bank statements from this same period. Be sure to bring copies of you most recent tax return and expect the lender to inquire about your employment status.

Prior to completing the refinancing transaction, you will need have your home appraised. A new home appraisal will give the lender an idea of how much your property is worth so they can include this in their consideration to refinance your loan. Appraisal costs are typically added to refinancing expenses. The lender will ask you what the balance of your current mortgage is. Be prepared to provide documentation showing the balance, interest paid and the conditions and terms of the current loan.

While this may seem like a lot of paperwork, keep in mind that it is the goal of your potential lender to ensure that you will be able to afford your new payments. Lenders ultimately make the decision as to whether or not to offer you a loan, but they are accountable to other parties including investors, their employer, etc. Each of these documents is an instrumental part of the refinancing process. They allow the lender to create terms that are fair and protect them should your circumstances ever change. You may be able to find less reputable lendors who will refinance the loan without much paperwork but these lenders are often predatory or offer significantly higher interest rates and very strict terms.