Refinancing your mortgage can help you take advantage of lower interest rates, shorten your loan term, or tap into your home equity. While the process used to require lengthy paperwork and in-person meetings, today most of the steps can be completed online. This allows you to refinance your mortgage online from the comfort of your home.
What is Refinancing and Why Refinance Online?
Refinancing simply means replacing your existing mortgage with a new loan that has better terms. This is done through the same process as getting a mortgage – you apply, submit documents, get approved, and close on the new loan. The funds from the new lender then pay off your current mortgage.
There are several benefits to refinancing online:
- Convenience – You can complete the application and submit documents on your own time. No need to go into a bank branch or take time off work.
- Speed – Online lenders can process loans faster since they utilize e-signatures and electronic document transfers.
- Better rates – Online lenders tend to offer very competitive rates as they have lower overhead costs.
- Wider selection – You can easily compare quotes from multiple online lenders to find the best deal.
As long as you prepare properly, the online process is quite straightforward. Read on to learn the step-by-step process.
READ ALSO: 2024’s Best Mortgage Rates for First Time Home Buyers
Refinancing Eligibility Requirements
While refinancing online is easy, you first need to make sure you meet the basic eligibility criteria:
- Credit score – Most lenders require a minimum score of 620. The higher your score, the better rate you can qualify for.
- Home equity – You’ll need at least 20% equity in your home. With less than 20%, you may get stuck with mortgage insurance.
- Employment – Proof of stable income is required, usually in the form of paystubs, tax returns and W-2s.
- Debt-to-income ratio – Your total monthly debt payments should not exceed 50% of your gross monthly income.
Check your credit report and home value to confirm you meet the requirements. This will help avoid disappointment later.
Choosing an Online Lender
Once you’ve determined you’re eligible, the next step is picking a lender. Be sure to get mortgage quotes from 3-5 different online lenders. Here are some top companies to consider:
- Quicken Loans – One of the pioneers of online lending, known for fast closings and great customer service.
- LoanDepot – Offers online applications and one of the largest lending networks in the U.S.
- Better.com – Focuses on speed and simplicity, with rates as low as 1.99%.
- LendingTree – Leading lending marketplace where you can compare quotes from multiple lenders.
- Rocket Mortgage – Backed by Quicken, Rocket uses AI to simplify the application process.
When comparing lenders, look at interest rates, fees, customer reviews, types of loans offered, and minimum requirements. Narrow it down to 2-3 top choices before moving forward.
Starting the Online Refinancing Process
Once you select a lender, you can begin the application process online. Here are the key steps:
1. Complete the Application
The lender will have you fill out a detailed application with information like:
- Your income, assets, debts, and employment
- Details on the home, mortgage, and property
- Your loan amount, purpose, and preferences
Many lenders pre-fill some data using public records to speed this up. Be sure to double check all information for accuracy.
2. Submit Required Documents
After starting the application, the lender will request various documents from you including:
- Pay stubs showing your income
- W-2s and tax returns
- Bank statements demonstrating your assets
- Your mortgage statement with current balance
- A government-issued ID for identification
You may need to provide additional documents depending on your situation. Be responsive to document requests so there are no processing delays.
3. Get Your Home Appraised
The lender will order a home appraisal to verify your home value and how much equity you have. Typical fees range from $300 – $500.
In some cases, the lender may waive the appraisal if you meet certain requirements. This can save time and money.
4. Allow the Lender to Verify Your Information
During the underwriting process, the lender will verify all the information you provided. This includes:
- Employment verification through your employer
- Credit report checks
- Background checks
- Assessment of your home value
- Review of your income, assets, and debts
Be ready to quickly provide any additional documents or clarification needed to avoid slowing things down.
5. Get Mortgage Approval
Within 1-2 weeks, you will receive a mortgage approval (or denial) based on the lender’s underwriting. This will outline the specific loan terms, like:
- Interest rate
- Monthly payments
- Loan amount
- Term length (e.g 15 or 30 years)
- Closing costs
If approved, you can move forward with finalizing the loan. If denied, ask for details so you can address any issues.
READ ALSO: How Making Extra Mortgage Payments Can Save You Thousands
Final Steps to Close and Fund Your Refinance
Once approved, you just need to complete a few more steps to finalize the new mortgage:
Lock In Your Interest Rate
Rates fluctuate daily, so you’ll want to lock in a rate as soon as possible. Rate locks hold your interest rate steady for 30-90 days. Get at least a 45 day lock.
Review Closing Disclosure
A closing disclosure will outline your final loan details, including fees and closing costs. Review it closely and address any discrepancies.
Sign Your Loan Documents
You can usually sign documents electronically. In some cases, you may need to sign final papers in-person at a closing office.
Transfer Funds and Pay Off Old Mortgage
On your closing date, the lender will wire the funds to pay off your old mortgage and transfer the home title.
And that’s it! Within a month or so, you can complete the entire refinancing process online from the convenience of home.
Tips for Streamlining Your Online Refinance
Here are some key tips to ensure the process goes smoothly:
- Check your eligibility upfront so you choose the right loan type and lender
- Compile all required documents in advance to send to the lender quickly
- Respond promptly to any additional requests from your lender
- Allow extra time for the appraisal to avoid delays
- Follow up regularly with your loan officer for status updates
- Provide payment for appraisal and credit check fees as soon as requested
- Triple check your closing disclosure to avoid any surprises or confusion
- Return signed documents ASAP so they are received before closing date
Following these tips will help ensure you can obtain an online mortgage refinance as quickly and easily as possible.
To Recap
Thanks to online lending technology, refinancing your mortgage is now much simpler. You can compare lenders, submit an application, and complete the entire process from home. This saves you time while still securing favorable terms.
However, it still pays to do your homework upfront. Check your eligibility, shop and compare lenders, and understand the documentation involved. If you prepare properly, an online refinance can be one of the easiest ways to put money in your pocket each month. Take advantage of today’s low rates to determine if refinancing could provide you significant monthly savings.
Refinancing FAQs
Still have some questions about the online refinance process? Here are answers to some frequently asked questions:
How long does it take to refinance online?
The entire online refinance process takes 30-45 days on average. It can be completed in as little as 2-3 weeks with some lenders.
When does it make sense to refinance?
It’s worth considering when rates drop at least 0.5-1% below your current rate. Refinancing can also make sense if you want to shorten your loan term or take out equity.
How much does it cost to refinance?
Closing costs for refinancing range from 2-5% of your mortgage balance. These fees pay for the appraisal, underwriting, and more.
Can I get approved to refinance with bad credit?
It’s possible, but more challenging. Most lenders require a minimum credit score of 620. With lower scores, you’ll pay a higher interest rate if approved.
Is it smart to do a cash-out refinance?
This can make sense if you can get a better rate or need to tap equity for things like home improvements. But cash-out refis have higher rates and costs.
Should I use the same lender I used for my original mortgage?
Not necessarily – it pays to shop around. But some lenders may offer loyalty discounts for existing customers, so consider them.
Can I refinance with no closing costs?
Some lenders offer no closing cost refinancing. But the fees usually get rolled into the loan balance, so you pay interest on them over the long term.
Is refinancing risky?
If rates drop after you refinance, you lose the chance to refinance again at a lower rate. And closing costs mean it takes time to break even. But for most, the savings outweigh the risks.
In another related article, How to Refinance Your Mortgage: A Step-by-Step Guide
