While refinance closings are less stressful than purchase closings because there is no seller and no moving involved, following a few simple rules can help make your refinance closing successful and hassle free.
The primary goal of refinancing is to obtain a new mortgage to lower your rate, take cash out or both. Closing within the period of your rate lock is a critical part of successfully refinancing. You and your loan officer can do everything right to get your loan ready to close, but if your rate lock expires and rates have increased, your refinance plans will have failed.
1. Get all details in writing from your loan officer at the beginning of your application. The new rules about disclosure of costs to borrowers will help with this step, but make it clear to your loan officer that you do not want an estimate of closing costs but an actual guaranteed dollar amount for out-of-pocket costs. There is no reason that these numbers should change by any more than $100 between the time of your application and the time of your closing. In many cases, if you negotiate a guarantee with your loan officer, you will not see any changes in costs even if unanticipated expenses do arise during the processing of your loan.
2. Over-estimate the funds you actually need at closing. When you refinance, there are the actual out-of-pocket costs you pay for title costs, points and any other lender fees. Many people focus on these numbers and not on the actual amount of cash they need to bring to closing. While your overall cash flow may not be affected when you look at your cash flow position the month before and the month after you refinance, you may find yourself having to write a very large check at closing to get your refinance done. If you are low on funds in your checking account, you could run into a problem that could delay your closing (and if it delays you past your rate lock date you could lose your low locked rate).
3. Lock your interest rate for longer than you think you will need to close. Many borrowers and loan officers try to save a few dollars by locking their rate in for shorter periods of time than they will need to process and close their loan.
4. Review all documentation prior to closing - do not wait until the day of closing. The new disclosure regulations actually require this step. But to prevent any problems at closing, review all of these numbers in detail with your closing agent. That way you can simply attend your closing and sign the documents rather than spend time learning them for the first time.
5. Choose the right team. Selecting a reputable mortgage lender or broker, mortgage loan officer and closing agent is the biggest key to a successful refinance closing. Working with inexperienced loan officers or closing agents can jeopardize your mortgage rate lock. Experienced professionals can guide you through the process while also offering the most competitive terms available.
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