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Mortgage Refinance Funding and Closing Process Overview

Mortgage Refinance Funding and Closing Process Overview

    Closing is the final step in the mortgage refinance process. After you have received final underwriting approval from your lender and satisfied all of the conditions to close, your refinance is ready to fund. Refinance closing involves multiple parties and a lot of documents so you work with a settlement agent, also knows as a closing agent or escrow agent, to make sure the process runs smoothly and that your loan closes according to schedule. Despite the high number of people and significant amount of paperwork involved, the refinance closing process usually takes less than a week.

    The settlement agent manages all of the logistics of the refinance recording, funding and closing processes including the preparation and distribution of loan documents, recording your loan with the appropriate county office and administering the transfer of funds and legal documents to all involved parties. 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, 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 refinance at least three business days before the close of the mortgage.  You can use the Closing Disclosure to make sure that your final loan terms are consistent with the terms that the lender committed to providing you at the start of the refinance process and that you are not being overcharged. If you determine that your final mortgage rate or closing costs, as outlined in the Closing Disclosure, have increased significantly without explanation you should cancel, or rescind, your loan.

    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 fraud or deceit.  An example of lender fraud is when lenders quote one set of mortgage terms at the beginning of the refinance process to win your business and then attempt to increase your mortgage rate or closing costs prior to closing.  Please note that the right of rescission period only applies to refinances and not purchase mortgages.

  • Great Mortgage IdeaFor 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 discrepancies
  • If you are comfortable moving forward with your refinancing you sign the closing documents and then let the three day right of rescission period expire.  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 and the refinance is a matter of public record. 

    After the transaction has been recorded, the settlement agent then distributes all of the funds in the escrow or trust account, including your mortgage proceeds, to the appropriate parties. Your bank is repaid its outstanding loan balance, third party service providers such as the lender, appraiser, title company and settlement agent receive their fees and commissions, city governments receive any property taxes and fees due, and you receives whatever proceeds remains after everyone else is paid if you are doing a cash out refinance. In short, everyone is paid the money they are due and the you officially have a new mortgage.

    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.  Review our First Payment Letter video  tutorial below to learn more about this important document.

  • FREEandCLEAR Mortgage Instructional Video

    First Payment Letter Overview Video

  • The table below compares refinance rates and closing costs for leading lenders in your area. We recommend that you contact multiple lenders to find the loan and program that best meet your needs. Shopping lenders and comparing loan proposals is the best way to save money on your refinance.

  • Rate Details*
    Loan Program:  
    Monthly Payment:  
    Points  More Info:
    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.
    Total Lender Fees:  
    Loan type:  
    Property Value:  
    Loan to Value:  
    Credit Rating:  
    Date Submitted:  
    Monthly Housing Payments
    P & I More Info
    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 More Info
    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 More Info
    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 More Info
    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 More Info
    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.
    (If Any)
    Total Monthly Housing Payments
    Lender Fees
    Points More Info
    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 Fee More Info
    Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
    Credit Report Fee More Info
    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 More Info
    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 More Info
    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 More Info
    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 More Info
    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.
    (If Any)
    FHA Upfront Premium More Info
    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.
    (If any)
    VA funding Fee (If any)
    Flood Fee
    Other Fees More Info

    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.
    Current Mortgage Refinance Rates as of December 13, 2018
    • Lender
    • APR
    • Loan Type
    • Rate
    • Payment
    • Fees
    • Contact
    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click here for more information on rates and product details.
  • Sources

    Closing Process:

About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael


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