As you probably know, a mortgage is a loan given by a lender or a bank that enables an individual to purchase a property. Mortgage refinance loans replace your current mortgage loan with a new loan with different rates, terms, and conditions.
Home and business owners apply for mortgage refinancing for several reasons. Lowering monthly payments, tapping into home equity, and shortening the terms of your loan are the most common reasons people apply for a refinance loan.
One of the most common questions people ask when applying for a refinance loan is what documents will I need and the criteria for a mortgage refinance? In this article, we’ll discuss the documents you need to apply for a mortgage refinance.
What Documents Do I Need for a Refinance Loan?
If you want to apply for mortgage refinancing, you’ll need the following documents:
1. Pay Stubs
Refinancing your mortgage is a process similar to applying for a new loan. Therefore, you’ll need some of the same documents required when you used for your original loan. Pay stubs are one of the most important forms of documentation. These show your potential lender that you have a steady flow of income. They provide proof of income and show lenders how much money you make monthly or annually. Essentially, they tell lenders that you are credible and likely to make your payments.
Many lenders will ask for pay stubs from the past two to three months. Exactly how far you need to go back depends on the lender’s specific requirements. If you are self-employed, you’ll need to provide alternate proof of income. In place of pay stubs, you will need documentation on the yearly profit/loss ratio of your business.
1. W-2s or 1090s
W-2s or 1090s provide a record of your financial status and your tax payments for the previous year. W-2 forms are another proof of income that can help you get approval for your new loan. If you are going for a mortgage refinance, your W-2 forms will help the lender get a clear image of your financial status.
2. Proof of Homeowners Insurance
When refinancing your mortgage, you will also need to show proof of your current homeowners insurance. Depending on how much coverage you have and the financial security of your insurance, your mortgage will be easily refinanced.
3. Credit Report
Lenders or mortgage banks also want to see your credit report. This allows them to check your history to make sure you handle your debts effectively. Your credit report will also give potential lenders a good look at your debt to income ratio. This impacts your ability to pay your bills, making sure you have a decent debt to income ratio before you apply for a new loan.
4. Statement of Assets
Finally, you will need to provide a statement of assets. This includes life insurance policies, investments, mutual funds, stocks, bonds, and retirement accounts. The more assets you have, the higher chance of getting a mortgage refinance because your assets can be used as collateral if you default on your loan.
For More Advice on Your Refinancing Options, Contact All American Financial Services
If you want to discuss your options with a Lancaster refinance expert, All American Financial Services is here to help. Contact us today to schedule an appointment with one of our financial experts.