How to Close on a Refinance

Many choose to refinance their home loans for a variety of reasons.

When a refinanced loan is closed, all paperwork and documents need to be prepared and signed by all borrowers, who must also provide income documentation. All signers will need to provide photo identification to confirm their identity. In some cases, a rescission notice will be given to the borrowers in case they decide to cancel the transaction. When all signatures are received, some of the paperwork has to be processed in a certain manner for it to be legitimate.

Instructions

1. Review all documents before the borrowers arrive: the mortgage document, promissory note, disclosure statement and the rescission notice if applicable. Ensure all names are spelled correctly, and verify all dates and amounts. Check your math. Your total should be comprised of the principal amount of the loan, finance charges, the total amount of the loan and any other special charges that may apply.

2. Photocopy any paperwork the debtor may have brought in, such as income verification, W-2s, recent pay stubs, tax statements and homeowners insurance policy. Review and copy driver's licenses.

3. Go over all of the paperwork with the borrower(s). Make sure they understand the terms and agreements including the new monthly payments, interest rate and when the first payment starts. If the borrower received any cash out, make sure they understand how much they are receiving. Review other disclosures such as late payments, acceleration clauses and any prepayment penalties.

4. Get signatures from the debtors on all paperwork. Once done, provide each with a borrowers copy. When you look at the bottom of each document, usually in triplicate, it will indicate which copies are for the borrower. Make sure the mortgage document is notarized after the borrowers sign. You also will need signatures from two witnesses.

5. File the new mortgage. The new mortgage will need to be filed with the county recorders office. There will be a minimum fee required by the recorders office. You will send a cover letter, mortgage document and the check for the fee to the county recorders office. The mortgage document cannot be filed until the rescission period has ended (if applicable).

Tips & Warnings

• Review the title work to ensure there are no other liens on the mortgage. Liens can be filed by creditors, such as a credit card company, if a debt is seriously delinquent. When a lien is filed, the creditor now has a security interest in the property. At closing, liens need to be paid off from the proceeds. A lien limits the amount of equity a borrower has. Equity is determined by subtracting all mortgage balances and liens from the fair market value of the home.

References

• Think Glink: What Can Go Wrong at a Refinance Closing?
• Lending Tree: Closing Your Refinance Mortgage Loan