Steps to Refinancing a Mortgage

By Justin Rychak, aka the MoneyScrooge

If you are looking for the right steps to follow when refinancing a mortgage, then look no further. These steps will ensure you get the BEST rate when you refinance.

There is a calculator at the end which will help you as well. I'd read it all the way through. It won’t take long!

Step 1: Get Clear About Your Goals for Refinancing a Mortgage.

1. Do you need a lower housing payment each month?
2. Do you need a fixed rate mortgage because your adjustable rate is changing?
3. Do you need a plan to save more money each month?

Step 2: Create a Plan.

Do you want to lower your monthly payment? Are you tight with you money each month? Do you really want to find a way to save more for retirement, college, etc.? Don't use refinancing as a crutch to save your finances. It won't happen by itself. You also need to change your financial behavior. You need to manage your money instead of your money managing you. In these situations, refinancing a mortgage is only a temporary fix to the real problem: you.

Make sure you start to control your money before you refinance.

1. Create achievable goals with your finances.
2. Eliminate bad debt.
3. Maximize your credit scores.
4. Create a budget or a cash flow plan that works.

These steps will give you control over your money and a peace of mind far calmer than just a refinance. We also teach this when you take the Homeowner Challenge.

Step 3: Get Your Paperwork in Order Before Calling Lenders.

Having your documents together before you call the loan officer puts him or her on notice that you are organized and know what you’re talking about. Loan officers will always size up a customer, and unfortunately those who don’t seem to pay attention often pay the highest interest rates. Your knowledge about the topic will show the lender you mean business, a small but important part to ensuring lower rates. You will need the following pieces of information when you call:

• 30 days worth of pay stubs;
• Two months worth of statements of your assets all pages (checking, savings, and retirement accounts; mutual funds; etc.);
• W2's from the last 2 years; and
• The promissory note and Hud-1 from the last refinance or purchase of your house.

Side Note: try to find out what your home is worth. The amount of loan you have verses the value of your home (loan-to-value amount) will determine your rates, fees, and ability to qualify for a refinance. The higher your loan-to-value, the higher your rates.

Step 4: Call up at Least Three Lenders.

Call up three local lenders (we recommend 4). Make sure one of them is a large bank, like Wells Fargo or Bank of America. Do the following:

• Explain the reason for the refinance and your goals.
• Ask the lender to help you determine your new loan-to-value (Your total mortgage(s) loan value verses your home value)
• Ask the lender to send you a good faith estimate including fees.
• Understand that the lender will need to run your credit. Note: if your credit is below 680, clean it up before you refinance if you can. It will save you thousands in lower interest rates. Check out our site for more information on this if you have bad credit.

Step 5: Negotiate with Them and Decide Which Lender to Use.

Compare the estimates you get from all three lenders and determine who has the best program. Then call up each lender and ask them to beat the lowest rate and fees offered. I know this sounds strange, but almost every lender has the authority to lower their rates. If you can create a win/win strategy, you can most certainly save yourself 1,000 of dollars. Check out the first link below more more details.

Step 6: Pull the Trigger (but only when it makes sense).

If you decide that refinancing your mortgage is the best option, then pull the trigger. It can help you get to where you need to be. Since I’ve been in mortgage banking for a long time, most people assume that I am always pro-refinancing. The truth is that I’m not. It actually doesn’t make sense in many cases. No, that’s not a misprint. Studies show that most refinances are a result of poor financial behavior. If you want to learn more about this, or create lasting change in your finances, check out the first link information below.



Justin Rychak is a mortgage banking executive turned financial coach who helps individuals achieve lasting change in their finances. If you are interested in learning how you can negotiate lower mortgage rates or create a financial plan so you can eventually create real wealth, click the first link below.


Justin has created the “Homeowner Challenge,” which is a way for homeowners to take control of their finances and change their behaviors about money. He also provides negotiation scripts and techniques to help homeowners negotiate lower mortgage rates when refinancing is necessary.

Check out others MoneyScrooge articles below:

Take the Homeowner Challenge (Get Negotiation Scripts for Refinancing)!
How to get the Lowest Rates when Refinancing?
Mortgage Rate Predictions
Mortgage Refinancing Calculator

Copyright LJ&L Inc. (MoneyScrooge)

Article: Steps to Refinancing a Mortgage