So youâre ready to refinance your mortgage loan to one with a lower interest rate. This could be a good move. Depending on your new interest rate, you could save a good bit of money each month in mortgage payments. You might also think that because youâre refinancing with your current mortgage lender, the one you already send your home loan payment to each month, you wonât have to come up with the reams of paperwork usually involved in a mortgage refinance.
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On this latter point, youâd be wrong. Your mortgage lender will always require you to come up with certain documents to prove your income, job status and credit score. This holds true even if youâre refinancing with the mortgage lender who is servicing your existing loan.
So get ready to dig for that paperwork. When youâre refinancing, thereâs usually no way around it.
Existing Lenders Need Papers to Approve a Refinance
You might think this makes little sense. After all, your mortgage lender verified your job status and income just five years ago when you took out your existing mortgage loan. But look at it from your mortgage lenderâs perspective. Your lenderâs job is to make sure you can make your mortgage payments each month, without defaulting on them.
When you apply for a refinance, your lender must verify that your financial situation hasnât changed since you were first approved for a mortgage loan. Your lender doesnât know if your spouse lost a job or that you no longer own a rental apartment that once provided steady income each month.
Related Article: shop around when youâre ready to refinance. You can choose any lender licensed to do business in your state. And you might find someone offering a lower interest rate than your existing lender.
The Documents Youâll Need to Refinance
If you are ready to refinance â whether with your current lender or a competitor â youâll have to provide certain information to prove your income and job status.
Youâll likely have to submit pay stubs from at least the past month and your W-2 forms from the last two years. Youâll need to send copies of your most recent bank account statements and maybe even your tax returns from the last two years.
Your lender will also check your credit to determine whether you have a history of paying your bills on time. Again, you might find this strange. Havenât you been sending in your monthly mortgage payments to this lender? What your lender doesnât know is if youâve been paying your car loan or student loan payments by their due dates. Your credit score will give lenders a more complete view of your financial habits.
Related Article: Why Thereâs No Way to Avoid Paperwork When Refinancing appeared first on SmartAsset Blog.