Documents Required to Refinance Your Mortagge

Mortgage refinancing makes sense when interest rates fall down, but some people choose this option for the purpose of debt consolidation. The type of mortgage, i.e. whether it is fixed or variable rate, determines whether refinancing is a good option.

In any case, banks have lending criteria and require that borrowers present certain documents.
Borrowers should present some type of ID such as a passport, driver’s license, or another document that shows their permanent address and identity as well as citizenship and age. Banks ask about the primary residence of the applicant and whether it is a house, condominium, or townhouse. Borrowers should supply information such as the sales price of the property, whether it is triplex, duplex, or single home, and other details. Banks are also interested in the borrower’s income level and additional sources of income. Salaried employees are required to produce recent pay stubs that show their monthly earnings (1 month of verifiable income with the borrower’s name and employer showing on the pay stubs). Those in commission-based sales and self-employed individuals should supply information such as accountant’s references, proof of income, and others. 

Financial institutions also require that applicants supply tax, investment, and bank documents such as monthly statements. Borrowers who refinance their mortgage loan should present information about their current expenses, including child support, loan and credit card expenses, rent, etc. Borrowers are asked to supply promissory notes, along with bank statements and the value of different asset accounts. Borrowers should present a description of their property along with the mortgage statement. The latter includes information such as current monthly payment, principal balance, and other charges. The type of information included in the statement varies based on the mortgage loan, i.e. whether it is an interest-only or repayment mortgage. Banks are interested in the borrower’s payment history, early repayment, interest rate history, and other details.

Financial institutions ask for documents such as discharge and bankruptcy letters and copies of court orders for child support, judgments, etc. In addition, financial institutions may request the applicant’s hazard insurance, along with the phone number and name of the insurer or agent. Some banks also request signed and dated tax transcripts and a copy of the divorce decree, if applicable.

Obviously, financial institutions are interested in the borrower’s payment history and credit record. While banks are interested in the borrower’s income level, they also ask borrowers to list expenses such as car insurance, phone, and public utilities. There are also equity and closing cost requirements, and the latter typically include loan application fees and title insurance. The costs also include private mortgage insurance and pest and home inspection.

Refinancing is a suitable option for persons who seek to modify the repayment schedule and reduce their payment amount. Some borrowers resort to debt consolidation because they have multiple, high-interest debts. Consolidation is one option, but it requires financial discipline. Applicants have different options such as reverse and option ARM mortgages. There are fixed-rate and jumbo options as well.