Mortgage Refinance Funding and Closing Process Overview
The settlement agent manages all of the logistics of the refinance recording, funding and closing processes and provides borrowers with final loan documents for their review the week the refinance is scheduled to close. . After you have reviewed all of the loan documents related to the refinancing process, the final step is for those documents to be recorded and made official and for your refinancing to fund.
Be sure to review the Closing Disclosure (CD), one of the key loan documents, carefully prior to finalizing your mortgage. The lender must provide a Closing Disclosure to the borrower that outlines the final, actual terms of the mortgage at least three business days before the close of the mortgage. If your final interest rate or closing costs have increased significantly without explanation you should cancel, or rescind, your mortgage.
For a refinance, mortgage regulations provide a three day right of rescission period after the borrower signs loan documents and receives the Closing Disclosure during which the borrower can rescind, or cancel, the loan. The right of rescission period is designed to protect borrowers against lender deceit. An example of lender deceit is when lenders quote one set of mortgage terms at the beginning of the process to win your business and then attempt to increase your interest rate or closing costs prior to closing. Please note:the right of rescission period only applies to refinancings and not purchase mortgages.
For a refinance, you can cancel your mortgage up to three business days after signing loan documents and then you are free to work with a different lender; however, we recommend that you do not sign your loan documents if you identify any significant issues or discepencies
If you are comfortable moving forward with your refinancing you sign the closing documents and then let the three day right of rescission period pass. On the day your mortgage closes, the lender wires funds to the settlement agent. The settlement agent then sends the deed of trust (or mortgage, if you are in the Southern U.S.) to the local county recorder office. After the transaction is recorded, the settlement agent distributes all of the funds in the escrow or trust account, including your mortgage proceeds, to the appropriate parties. Your current mortgage balance is paid-off in full, third party service providers such as the lender, appraiser and settlement agent receive their fees and the borrower receives whatever money remains after everyone else is paid (if the borrower is taking cash-out from the refinancing). Your refinance has officially funded and closed.
The chart outlines the key steps to recording, funding and closing your refinancing.
Key Steps to Recording and Funding
Lender provides loan documents to settlement agent
Borrower reviews and signs loan documents
Settlement agent sends signed documents to lender
Lender reviews and approves loan documents
Lender wires funds to settlement agent
Settlement agent releases funds to all parties
Key Points to Remember When Your Refinancing Closes
Now that your refinancing has closed it is time to celebrate but before you pop the champagne there are a couple of last minute items to remember. Be sure to review the first payment letter provided by the lender, which notes your monthly mortgage payment amount, when the payment is due and payment method. The last thing you want to do is pay a late fee because your were late with your first mortgage payment.
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Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
Homeowner Association Fee
Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
Total Monthly Housing Payments
Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
Credit Report Fee
Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
Tax Service Fee
Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
Wire Transfer Fee
Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
FHA Upfront Premium
FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
VA funding Fee (If any)
Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)
The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.
Total Lender Fees
*Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
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