How to Change Your Mortgage Provider by Refinancing

Changing a mortgage provider involves refinancing your existing home loan, replacing it with a new one that often has different terms. This can help homeowners achieve financial goals like lowering monthly payments or accessing home equity. This guide covers the steps from understanding options to completing the new loan.

Understanding Refinancing

Mortgage refinancing means securing a new loan to pay off your current mortgage, replacing it. This differs from your mortgage being sold to a new servicer, an administrative change not initiated by the borrower. Refinancing allows homeowners to modify loan terms or access home equity.

Two primary types of refinancing serve different financial objectives. Rate-and-term refinancing changes the interest rate, loan term, or both, often to secure a lower rate or reduce monthly payments. Cash-out refinancing allows you to borrow more than your current mortgage balance, receiving the difference as a lump sum. This option is used for expenses like home renovations or debt consolidation. The cash amount depends on your home’s equity (market value minus outstanding loan balance).

Preparing Your Financial Documents

Gathering financial documents is an important step before applying for a new mortgage. Lenders require a comprehensive view of your financial standing to assess eligibility and risk. Organizing these materials in advance streamlines the application process.

Proof of income includes pay stubs (30-60 days) and W-2 forms (past two years). Self-employed individuals need tax returns from the previous two years. Lenders use these documents to verify employment and income consistency.

Proof of assets, such as bank and investment account statements (past two to three months), is necessary. These statements show available funds for closing costs and financial reserves. Provide recent statements for your current mortgage and property taxes to detail existing housing obligations.

Homeowners insurance policy information is needed to ensure the property is adequately covered. Identification documents, such as a driver’s license or passport, verify your identity. Information about existing debts, including credit card and auto loan statements, helps lenders calculate your debt-to-income ratio. Understand your current credit score and history, obtainable from major credit bureaus.

Submitting Your Application

Once financial documents are prepared, submit your application to potential lenders. Initiate contact online, by phone, or in-person. Comparing offers from multiple lenders helps secure favorable terms for your new mortgage.

The application form requires inputting the detailed financial information you gathered, including personal data, employment history, income, assets, and existing debt. Accuracy and completeness in this initial submission are important to avoid delays.

Following submission, the lender conducts an initial review for basic eligibility. Your application then enters underwriting, where a mortgage underwriter evaluates your financial profile and the property. This review includes a credit check to assess your borrowing history and payment habits.

Underwriters verify income and employment, often contacting employers. Assets are confirmed for sufficient funds for closing costs and required reserves. A property appraisal determines the home’s current market value, costing $300 to $1,000. A title search confirms clear ownership and identifies any existing liens.

The underwriting process can take a few days to several weeks, averaging 30 to 45 days, depending on your situation’s complexity and lender volume. Throughout this phase, prompt responses to requests for additional information help keep the process moving efficiently.

Completing the Refinance

After your new mortgage application is approved, the process moves towards finalization and closing. You will receive disclosure documents, beginning with the Loan Estimate, provided within three business days of your application. This outlines the estimated costs and terms of the loan.

Closer to the closing date, you will receive the Closing Disclosure, detailing the final loan terms and all associated costs. Federal regulations require this document be provided at least three business days before closing, allowing ample time for review. Compare the Closing Disclosure with the Loan Estimate to identify any significant discrepancies in fees or terms.

The closing appointment is scheduled with a title company or an attorney, depending on local requirements. On closing day, you will sign legal documents, including the promissory note (your promise to repay the loan) and the new mortgage or deed of trust (securing the loan against your property). You will also sign various truth-in-lending disclosures.

Closing costs, covering fees such as origination charges, appraisal fees, title insurance, and recording fees, are paid at this time. These costs range from 2% to 6% of the new loan amount. Funds are then disbursed to pay off your old mortgage, and any cash-out funds are provided. The process concludes with the first payment due on your new loan.