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How to Refinance in California: A Guide for Homeowners

This past year of 2020 was a great time to refinance in California, from a mortgage rate perspective. We’ve written about that before. But we’ve never created a step-by-step tutorial that explains how to refinance a home loan in California.

Today, we are correcting that deficiency. The following tutorial explains the mortgage refinancing process in a clear, step-by-step fashion.

How to Refinance in California: Step-By-Step

The refi process can vary slightly from one borrower to the next due to a number of factors. People refinance their homes in California for different reasons, which we’ll cover in a moment. But the process is generally the same across the board.

Here’s how to refinance a home loan in California:

1. Identify your goals and objectives.

The first thing you need to do is determine your reason for refinancing your home. What do you hope to get out of it? What are you trying to accomplish? Answering these questions will help you determine whether or not it makes sense to refinance.

Homeowners in California refinance for different reasons. Some do it to to shorten the term and pay off their mortgage loan sooner. Others do it to convert some of their home’s equity into cash, with a “cash-out” refi. Most homeowners refinance to secure a lower mortgage rate and thereby reduce their monthly payments.

The question you need to ask yourself is, what is my primary goal for refinancing? Once you know that, you can move on to the next step in the refinance process.

2. Determine if you will benefit from refinancing.

At this point, you should have a specific financial goal in mind. Now you have to figure out if you can accomplish that goal by refinancing your home.

Let’s assume you’re like a lot of California homeowners, and your primary goal for refinancing is to reduce your monthly payments. In that case, you need to make sure you can secure a lower rate and save enough money over the long term to make up for your closing costs.

If you are refinancing to convert some of your home equity into cash, you’ll need to know the current market value of your home.┬áBecause that’s what determines your equity position.

The idea here, with these first two steps, is to establish a goal and make sure you can meet it. You might need your mortgage lender’s assistance to answer this second question. For example, we can review your current mortgage situation and help you figure out if you might benefit by refinancing into a lower rate.

Remember: You only want to refinance your home if it makes sense and supports your objectives. That’s the point of this preliminary homework.

3. Gather your financial documents.

You probably remember all of the paperwork you had to round up when you first took out your mortgage loan. Homeowners have to do the same thing when refinancing a home in California.

You might have to provide recent tax returns, W-2 forms, bank statements and pay stubs. Refinancing homeowners usually have to show their most recent mortgage statements, as well. These are some of the commonly requested documents during the mortgage refinance process in California.

If you choose to work with Bridgepoint Funding, we will provide you with a list of documents needed. So there won’t be any guesswork on your end.

4. Submit a loan application.

Anyone using a mortgage loan to purchase or refinance a home in California must submit a standard loan application. The official name for this document is the Uniform Residential Loan Application, or URLA. You can Google that name to see a sample document online.

The loan application form requests basic information about you, your employment situation, your income, and the home that’s being refinanced.

5. Get a home appraisal.

When you refinance your home, the bank or mortgage lender will have the property appraised to determine its current market value. This is done to ensure that the home is worth enough to justify the loan amount.

Generally speaking, California homeowners must be in a positive equity situation in order to qualify for a basic mortgage refinance loan. And that’s where the appraisal comes into the picture.

As a homeowner, there’s really not much for you to do during this stage. The lender will request the appraisal and report the results back to you. The key point to remember here is that the home must be appraised before the refinance loan can be finalized and funded.

6. Sign your closing documents and pay your costs.

California refinance loans usually come with closing costs, just like their purchase-related counterparts. Basically, any time you purchase or refinance a home using a mortgage loan, you’re going to encounter certain charges and fees.

As a current homeowner, you’re probably familiar with some of those costs. They include credit reporting fees, home appraisal fees, mortgage processing fees and more.

There’s also some paperwork that needs to be signed when refinancing a home in California (though not as much as you encountered when buying). There’s no property transfer taking place, so there’s less paperwork with a refi compared to a purchase. But you will have some documents to sign during the refinancing process.

Once you sign all the paperwork and pay your closing costs, you have successfully refinanced your home!

Have questions? Bridgepoint Funding has been meeting the mortgage needs of California homeowners for nearly 20 years. We can answer any questions you have about refinancing a mortgage loan in California. We can also help you determine if a refi makes sense in your particular situation. Please contact our staff to get started!

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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