Six Steps To Simple Refinancing

Six Steps To Si

With rates trending down during the past few weeks I have been refinancing my home. Like millions of other homeowners, I regard refinancing with mixed feelings -- lower rates are wonderful but the details and requirements associated with the process seem endless and numbing.

You know with absolute certainty that lenders will want an assortment of paperwork to complete a loan application. Given this inevitability do not fight the monster, embrace it: Get a file folder, a big one, and use the six-step checklist below to assemble the documents you're most likely to need.

Step 1: Income

Get copies of your two or three most recent payroll stubs, your two latest federal tax returns, and your most recent W-2 forms. As you get new payroll stubs during the application process, keep them in the file.

If you're self-employed you will likely be required to provide year-to-date income and expense estimate. Indicate which figures are "actual," which are "estimated" and be conservative in your reporting.

Every household has a few financial oddities. For instance, if you started work in May your W-2 will not reflect a full year's pay. If you have a partnership interest or other complex holding, you'll need documentation. Be prepared to explain special situations and provide documentation as required.

Step 2: Debts

Make a list of your debts -- who is owed what, the total amount of each debt, the required monthly payments, account numbers and contact information. An easy approach is to make copies of your latest payment stubs for auto, credit card, mortgage and other debt -- such stubs have account numbers which the lender can use to verify information.

If you have student loans, show the total of what you owe, to whom, account numbers, and what you pay each month.

Step 3: Assets

Copy your most recent IRA, Keogh, mutual fund and other account statements -- they have dollar totals and account numbers. List all the real estate you own by address and estimated value. Be sure to emphasize "estimated" because without an actual sale the value of real estate is debatable. Be restrained -- lenders like happy surprises, such as an independent appraisal which shows your home is worth more than your estimate.

If you own investment real estate, provide leases for all properties.

Step 4: Credit

Your lender will obtain credit reports from the three leading credit reporting agencies (CRAs), along with credit scores from each bureau. Several states (Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey and Vermont) require credit reporting agencies to provide free credit reports to residents. Under the federal Fair Credit Reporting Act (FCRA) reports may also be available without charge if you have been refused credit, denied a job or insurance under certain conditions, believe your report is inaccurate, or are now unemployed (and expect to seek unemployment benefits) or on welfare. Also under FCRA, a credit reporting agency can charge up to $9 for a copy of your credit report -- but in some jurisdictions reports may be available at lower cost.