How to Change Your Mortgage Lender & What to Expect

Refinancing involves replacing an existing home loan with a new one. The borrower secures a new mortgage to pay off the prior obligation, allowing adjustments to terms like the interest rate or repayment period.

Preparing to Change Lenders

Before refinancing, review your current mortgage. Gather details like the interest rate, remaining loan balance, and loan type. Identify any prepayment penalties, which are fees for early loan payoff, usually applicable within the first few years. Also, understand your escrow account’s current balance.

Next, assess your financial standing by checking your credit score and reviewing your credit report for accuracy. A higher credit score generally leads to more favorable interest rates. Lenders will require documentation to verify your income, assets, and existing debts, including recent pay stubs, W-2 forms, and federal tax returns.

Provide statements for all bank, investment, and retirement accounts to demonstrate assets. Current statements for other debts, such as credit cards, student loans, or auto loans, are also required. Organize these financial records to streamline the application process.

Define your specific goals for refinancing. Objectives often include securing a lower interest rate, shortening the loan term, or utilizing a cash-out refinance to access home equity. Other goals might involve consolidating debt or switching between adjustable-rate and fixed-rate mortgage products.

The Refinancing Application Process

Once financial preparation is complete, engage with potential new lenders. Compare offers from traditional banks, credit unions, and mortgage brokers. Focus on interest rates, the Annual Percentage Rate (APR), and associated closing costs. Request a Loan Estimate from each lender within three business days to compare terms.

After selecting a lender and loan type, submit your mortgage application. This involves completing a standardized form and providing all gathered financial documents. The lender will then conduct a thorough review of your credit history, income stability, and financial profile.

Following application submission, the process moves into underwriting and loan processing. An underwriter evaluates your creditworthiness, employment history, assets, and debts to determine loan approval. An appraisal of the property determines its fair market value. A title search verifies property ownership and identifies any existing liens.

The underwriting process can take 30 to 45 days. If your application meets the lender’s criteria, you will receive a loan commitment letter. This document signifies the lender’s intent to provide the loan under specified terms. A commitment letter may be conditional, requiring you to fulfill outstanding requirements before final approval.

Completing the Mortgage Change

The final stage begins with reviewing the Closing Disclosure (CD), provided by your lender at least three business days before closing. This disclosure details the final loan terms, projected monthly payments, and all associated fees and costs. Compare these final terms with your initial Loan Estimate.

The closing meeting finalizes your new mortgage. You will meet with a settlement agent to sign legal documents that formalize the loan agreement. Key documents include the promissory note, your promise to repay the loan, and the mortgage or deed of trust, which establishes the property as collateral.

After signing, the new loan is funded. For primary residences, a three-business-day rescission period follows closing, allowing cancellation without penalty. Once this period expires, the new loan becomes fully effective.

Post-closing, the new lender will ensure your old mortgage is paid off; confirm this payoff. Existing escrow accounts from your previous lender will transfer to the new lender. Your first payment to the new lender will be due on a specified date, initiating your repayment schedule.