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When refinance demand spikes, the process slows down. According to the latest data from ICE Mortgage Technology, refinance closings can drag on for about seven weeks on average.
But you can streamline the process by gathering all the documentation you might need upfront. Lenders usually ask for this information once you submit the mortgage application, so prepare by organizing the paperwork now.
Here are the documents you’ll need for a mortgage refinance:
Proof of income
Why it matters: Lenders will go over your monthly income to check whether you earn enough to make payments on your new home loan and existing debts, plus pay for your living expenses. Your income documents verify how much you receive and show a trend in your earnings.
For salaried employees
Whether you earn an annual salary or an hourly wage, you’ll typically receive pay stubs and tax forms from your employer. If you don’t have copies on file, contact your human resources department. Here’s what you’ll need to provide:
- W-2 forms from the previous two years
- 1099s if you have a side income
- Pay stubs from the previous 30 days
- Bank statements from the previous two months
- Signed federal tax returns (personal) from the previous two years or a signed IRS Form 4506-T
- The names, addresses, and phone numbers of your employers from the last two years
- A written explanation if you were employed for less than two years or you have an employment gap
For freelancers and independent contractors
Self-employed workers — which include freelancers and independent contractors — don’t receive W-2 forms or pay stubs from an employer. As a self-employed worker, you’ll need to show other types of documents to verify your income.
You can usually download statements from your business bank account and generate business statements using bookkeeping software. Depending on how you filed your taxes, you might also have a PDF copy of your tax return or be able to download one from your online tax-filing program. Here’s what you may need to provide:
- Signed federal tax returns (personal and potentially business) from the previous three years
- Your most recent quarterly or year-to-date profit and loss statement
- A list of all business debts
- Bank statements (personal and business) from the previous two months
- Fannie Mae’s Form 1084 (potentially)
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Insurance information
Why it matters: Insurance documents will show who legally owns the home and whether you’ve maintained coverage on it.
For homeowners insurance
Your mortgage lender will ask for a copy of your homeowners insurance declaration page to make sure the coverage on your home is current.
They may also ask for your insurance agent’s name and phone number in case they have questions. If you don’t have a paper copy on file, you can usually find one by logging in to your account or contacting your agent.
To help the lender check whether the coverage is sufficient, they might order an appraisal to verify the value of the home. If the value has changed since taking out your insurance policy, you’ll need to work with your insurance company and update the coverage limits.
For title insurance
You’ll need a copy of the recorded deed with the names of the legal owners along with your title insurance, which provides a legal description of your property. The title insurance also helps the lender verify your property taxes, which are included in your debt-to-income ratio (DTI).
Your title insurance policy should be included in your closing documents. If you’ve misplaced them, contact your original lender or title company and ask if they have copies on file.
Credit verification
Why it matters: Lenders pull your credit scores to help them measure how well you’ve handled borrowed money in the past. They’ll also look over your credit reports to check for things like current debt balances and negative credit events.
Your lender usually just needs your verbal permission to pull your credit, but you may need to produce additional documentation to support the credit check:
- A letter explaining late payments, collections, judgments, or other derogatory items listed on your credit reports.
- Bankruptcy discharge papers if one is included in your credit history.
- Statements that show your payment history for public utilities, phone, cable TV, car insurance, and other expenses.
Don’t Miss: Minimum Credit Score Needed to Refinance Your Home
Statements of debt
Why it matters: Your lender will calculate your debt-to-income ratio by looking at your current debt balances. This will help the lender figure out if you can cover the monthly mortgage payment.
Check your online accounts for your most recent billing statements, or contact each lender for a copy. You’ll need these to show your financial obligations:
- The most recent mortgage statement on the home you’re refinancing and any other properties you own.
- The most recent billing statement for any outstanding home equity loans or lines of credit.
- The most recent monthly statement for accounts listed on your credit reports, such as student loans, car loans, personal loans, and credit cards.
- Any debts that aren’t listed on your credit reports, such as payday loans.
Statement of assets
Why it matters: Your lender will need to check whether you have the funds to cover the closing costs on the new mortgage. And in some cases, you may need to have up to 12 months’ of cash reserves in the bank. These are meant to help you cover mortgage payments in a financial emergency.
Include recent monthly statements from any account that you’ll withdraw money from or have placed your cash reserves in. These may include:
- Bank statements for checking or savings accounts
- Retirement account statements
- Brokerage account statements
- Certificates of deposit statements
