You might be thinking that you won’t have to worry about tons of paperwork when you refinance, especially if you’re refinancing with your current lender. Unfortunately, what you might be thinking is wrong. According to Mortgage Investors Group, you’ll still need to gather certain paperwork to show proof of your income, credit rating, and employment status — all over again.
Why Lenders Require So Much Paperwork for a Refinance
As with applying for a home loan, potential lenders need to verify your financial circumstances, to verify that you’re still financially capable if they approve you for a refinance. Even your current mortgage lender does not know if you still have a job or that you sold a rental property that you obtain steady income from.
If your income has taken a turn for the worse since the time you applied for your current mortgage, chances are you’d be hard-pressed to afford a new monthly payment, even with a reduced monthly payment. So it’s perfectly natural for your lender to play it safe and require that you submit relevant paperwork before approving a refinancing, even if you’ve been diligently paying your current mortgage every month.
The great thing about all this is that since your current mortgage lender will need you to submit the same paperwork as you would if you apply for a refinance through other lenders, you could take your time and shop around, says an experienced loan officer in Nashville. Maybe you could even secure a better rate with another lender.
On to the documents that you’ll need. In general, you’ll have to provide pay stubs from the last couple of months, official copies of current statements from your bank, as well as your tax return forms from the past two years. Lastly, they’ll check your credit history to verify your creditworthiness.
The Bottom Line
Yes, it is quite a hassle to have to go through so much paperwork all over again to secure a refinance deal. However, it’s one of the most effective ways mortgage lenders use for gauging your financial capacity.