What can I expect during the refinance procedure?
Something that is often overlooked within the home loan industry is the education of the client in the steps of doing business together. As the borrower, you should want know what the process is, and what to expect from your loan officer. This is a basic account of the events that take place during a refinance transaction when you are dealing with me.
First Contact – Every loan starts somewhere, and in the technology age it is usually a phone call or an email. Occasionally, it still happens when I meet someone in public and we exchange business cards. But it seems that phone calls, emails, and internet (blog links), are common.
In the first contact we will introduce ourselves and talk briefly about what your basic goals are, and how soon (ideally) you want to take action. The first contact then ends with me saying “…the next step is the application, and that will take about 20-30 minutes. Do you want to do it now, or set a time to do it later this week?”
The Application - A full application is necessary to give you (the borrower) accurate information and loan options. There are hundreds of factors that lenders (banks) take into consideration when approving loans and these should all be identified in the application. The method I prefer, to get the most accurate information, is to interview you over the phone.
The questions that I ask are things you will usually know off the top of your head. I want your Social Security #, work history for last 2 years, information on your home, and basic financial information. As you answer the questions, I enter them directly into my computer. The next part of this phone application is when I ask permission to pull your credit report. We will then briefly review your credit report to identify strengths, weaknesses, and find any inaccuracies in it. I will also tell you your credit scores and even give you a copy of your credit report if you wish.
The last phase of the application is when we discuss your goals in more detail. Typical questions are,… Do you want to simply lower your payment (rate & term) or do you need cash out for debt consolidation or home improvements? How long do you see yourself in that house? Do you want to keep it as an investment property when you move? Do you want to leverage this property to buy additional property? Etc… Some people have simple goals and some are quite complex. In some cases, people just want to know what their options are.
At the end of the application, I will tell you how much time I will need to produce your loan options. Usually, I need 24-48 hours to get back with you – but I will urge you to call me if other ideas or questions come up during this planning window.
Loan Options – At the conclusion of my analysis, I usually come up with one (or more) solutions that will make sense for you (the borrower) to pursue. To make things easier for you to understand, I will email one (or more) Good Faith Estimates (GFE) to you before our upcoming phone call. You will be instructed to print the Good Faith Estimates so that we can review them together over the phone. I always recommend that you print the Good Faith Estimates so you can take notes on them.
We will then review the Good Faith Estimates over the phone, and I will explain the loan program, fees, interest rates, escrows, and estimated payments until you (the borrower) are comfortable with all of the information on the Good Faith Estimate. This process could take a few minutes for some people, whereas others can take well over an hour to understand all of the concepts of this transaction. We will not move forward to the next step of the loan process until I feel you are comfortable with this material.
Also, please note that sometimes my conclusion is that you should not refinance right now, and we revisit this idea in 6 or 12 months.
At this point you (the borrower) will tell me one of three things. All of which are OK.
· You like an option you see, and want to move forward
· You would like a day or two to review the options before choosing
· You would like to either see more options or end the pursuit of refinancing
Once you have made the decision to move forward, we can either Lock the interest rate or Float. Locking is a simple as telling me “I want to lock this rate”.
Locking - This term refers to how we secure the interest rate on your new loan. The bank that your loan is going to, will allow us to “lock in” today’s interest rate that they are offering. They will guarantee that specific rate for a fixed period of time, typically 30 days. I recommend locking the rate at this time and begin processing the loan.
You also have the option to Float. Floating means that you are not locking in today’s rate – rather, we will see what the market does over the next few days (or weeks) and try to get a better rate. We can do this for you in hopes of bettering your situation, but it is a gamble and there are losers.
The truth is that interest rates change every day, and even the savviest financial expert cannot tell you what is going to happen to rates. We can make educated guesses on the future of interest rates, but there are so many variables that affect the market that we can often be wrong. My advice to everyone is, “…If the loan makes sense with the rate you see today, you should lock that rate and move on.”
Send You the Application - You were probably wondering when you were going to get this. Well, after we agree on a Loan Option, I will send you the application and it will be specific to that Loan Option. When you receive the application you will notice that it has already been filled it out with your information. As you review the application you will proofread the answers you gave me, sign it, and send it back.
There will also be a cover letter attached with the application that gives you a list of additional documentation that I will need. This list typically requests items like Pay Stubs, Tax Returns, Bank Statements, Photocopy of Your Driver License, etc… There will also be a return envelope for you to return the application and copies of the items I request. If there are any areas that are not perfectly clear we can review them at this time.
Processing - This is a general term in lending that can mean so many things. In this case I am referring to the internal paperwork that I request on your behalf in addition to your application. We can have dozens of items to collect for your loan, but the big ones are your Appraisal, Title Report, Home Owners Ins., Loan Payoff Amount, HOA, Flood Certification, and Property Tax info. Aside from the Appraisal, all of these items get collected by me without any effort on your part.
The Appraisal does require that the appraiser comes to your home for a brief inspection. He will take pictures of the inside of your home & possibly measure some rooms. Most appraisers will take less than 20 minutes of your time for this inspection. I will have the appraiser to contact you by phone to pick out a time that works well for both of you.
Once my processing is complete, and I receive your application back with the requested documentation, we enter a new stage called Underwriting.
Underwriting – The bank that will be servicing this loan always requests that the loan gets underwritten before they fund it. Underwriting is the process of a special person reviewing all of the information & documentation to verify that all of the loan requirements are met. This process of underwriting usually takes a few hours, however it can take several days before the underwriter can see the file due to their current volume, or where they are physically located.
During the underwriting process, the underwriter can request additional documentation from us if they have any issues with the loan. This additional list of documentation is referred to as “conditions”. In most cases, I will handle all of the conditions myself. On occasion, I may call you to get me more info on something, or to write a letter of explanation to the underwriter.
Once all of our conditions are “satisfied”, we can now move on to you signing the documents on your new loan.
Signing the Documents – Here is when I call you with the good news that your loan has been approved, and to schedule a time for you to sign the final loan Documents. This usually takes place at the Title Company and will take from 30 – 90 minutes depending on how many questions you may have. Be prepared to sign your name about 100 times. If your schedule does not permit you going to the Title Company, I can have a mobile signer come to your home or office at your convenience.
This will actually be the very first time that you see the final numbers on the loan. The more important numbers would be your monthly payment and how much money you will be getting. Up to this moment, everything you have seen in the application and the good faith estimate are truly estimates. Now that you are seeing the final numbers for the first time, you are given a Recission Period to make sure that you are OK with all of the final number you see.
Recission Period - This is basically a 3 day period that begins the day after you sign. It is design for you to reflect upon the numbers you experienced at the signing. The goal is to give you ample time to opt out of the loan if you do not like what the final numbers are. The loan will not fund and you will not be able to collect any money from this refinance until the recission period ends and the loan Funds.
Please note that if you are in a hurry to get the money, that you cannot waive the recission period – and you have to wait the 3 days to get you money.
Funding - The rescission period has ended and the bank has funded the loan. Funding is the act of receiving a wire of money from the bank to the Title Company. I will give you a call and let you know that the loan has funded and the process is complete (or in the case you are cashing out) you can collect your money now. Typically in a cash out scenario, the Title Company will ask you at the signing if you want them to mail the check, hold the check for you to pick up, or if you want a wire transfer to one of your bank accounts.
For those of you who were consolidating your debt, and needed to pay some debt at closing to qualify, those checks will be mailed out by the Title company on this day as well. Congratulations, your refinance is over. Only one thing left to do… refer me to your friends and family. Over 75% of my business is by referral, so do not be surprised when I ask you to refer me if you are pleased with this experience.
Timeline – A typical refinance will take about 3 to 4 weeks to complete from the day I take your Application over the phone. Sometimes we can speed up this process, but do not expect to get your refinance completed in less than 12 business days.
Community First Financial, LLC
7575 E Redfield Rd Suite 235
Scottsdale, AZ 85260
480-305-8900 ext 305 - office
480-907-2435 - fax
602-434-8261 - cell