With interest rates at historic lows, many homeowners are considering refinancing their mortgages to take advantage of lower rates and reduce their monthly payments. Thanks to technology advancements, it’s now possible to refinance your mortgage entirely online without ever stepping foot in a physical branch. While online refinancing offers convenience, doing it completely digitally requires diligence to ensure you’re making the best financial decision. This comprehensive guide will walk you through everything you need to know to refinance your mortgage online.

Understanding the Refinancing Process

Whether you refinance online or in person, the basic refinancing process remains the same. Here are the main steps:

1. Check Your Credit and Shop Rates

The first step is to check your credit report and credit score. Lenders will use these to determine the interest rate you qualify for. You’ll want a credit score of at least 740 for the best rates. Next, get prequalified or preapproved rates from multiple lenders to compare.

2. Complete a Loan Application

Submitting a full loan application provides lenders with detailed financial information to underwrite and approve your refinance. Be prepared to disclose your income, debts, assets, and other details.

3. Order an Appraisal

Lenders will order an appraisal to verify your home’s current value and ensure it secures the new loan amount. Appraisals typically cost $400-$500.

4. Underwriting Review

Underwriters analyze your application, credit, and appraisal to assess your ability to repay the new loan. This phase can take 1-2 weeks.

5. Closing Process

Once approved, you’ll receive closing disclosures that outline all fees, taxes, and final costs. Then it’s time to sign documents, often electronically, to close the refinance.

6. Make First Payment on New Loan

After closing, your new lower monthly payment amount will go into effect.

Taking the process online streamlines steps like applications and document signing but doesn’t eliminate important due diligence. Proper planning up front ensures a smooth refinance.

Benefits of Refinancing Online

Completing a mortgage refinance entirely through an online lender’s website provides notable conveniences over visiting a physical branch:

Hassle-Free Apply from Anywhere

Online applications can be started from any device at any time, stopping and restarting as needed. No traveling or scheduling an in-person meeting is necessary.

Fast Prequalifications

Online lenders can often provide rate quotes and prequalify you within minutes by pulling a soft credit check. This lets you compare multiple offers quickly.

Paperless Process

All documents can be e-signed, avoiding faxing or mailing physical papers back-and-forth. Closing documents may even let you conduct a remote online notarization.

Save Time

With automated online workflows and the ability to upload documents digitally, refinancing through a digital lender often takes less time overall than traditional in-person methods.

Of course, online refinancing may not suit everyone’s needs. Some homeowners prefer face-to-face guidance or have complex financial situations requiring more personalized support. But for basic refinances, going digital removes a lot of friction.

Choosing an Online Lender

With dozens of online lenders to pick from, it’s important to thoroughly research options before applying. Consider these factors when selecting the right company to refinance your mortgage online:

• Rates and Fees – Compare APRs and total closing costs. Look out for prepayment penalties.
• Loan Types – Ensure the lender offers the type of loan you need (conventional, FHA, VA, etc.).
• Minimum Requirements – Know the lender’s credit, income, and property value thresholds.
• Customer Service – Check online reviews of the lender’s responsiveness. Can you reach a real person for help?
• Technology and Process – Evaluate the lender’s website usability and digital loan process flow.
• Reputation – Read background on the lender through the Better Business Bureau and other third-party sites.

Going with a well-established, top-rated online lender gives you reassurance their refinancing services will go smoothly. Newer players may still be ironing out kinks in their platform and processes.

Understanding Refinance Loan Types

The main loan types available for an online mortgage refinance are conventional loans, FHA loans, VA loans, and USDA loans. It’s prudent to understand the qualities of each:

Conventional Loans

• Best rates if you have 20% home equity and credit score over 740
• No mortgage insurance with 20% equity, otherwise it’s required
• Private loans sold on secondary market

FHA Loans

• Can refinance with as little as 3.5% equity
• Requires mortgage insurance for life of loan, even after 20% equity
• Insurance premium wrapped into monthly payment

VA Loans

• Only for eligible veterans and military
• No down payment or mortgage insurance ever needed
• Strict underwriting may require better credit than other loans

USDA Loans

• For low-to-moderate income rural homeowners
• No down payment or mortgage insurance needed
• Higher property value limits than FHA in rural communities

Carefully review the pros and cons of your loan options to determine the best fit considering your financial situation and goals. An online lender can advise you on eligibility.

What Documents to Gather

A smooth mortgage refinance application requires preparing documents in advance. With an online process, you’ll need to digitize or upload many items. Have these digital files ready:

• Last 2 years W-2s, 1099s, tax returns
• Last 30 days paystubs
• 2 months bank/retirement statements
• Photo ID
• Social Security card copy
• Property deed/title
• Existing mortgage statements
• Flood certificate (if applicable)

You may also need to provide documentation for additional income sources, child support/alimony, assets being used for down payment, and more depending on your situation. Collecting everything upfront saves time in underwriting.

Watch Out for Common Refinance Mistakes

With the convenience of refinancing online also comes risks if you aren’t vigilant. Here are some top mistakes to avoid:

• Not shopping multiple lenders – Make sure to comparison shop to find the best rates.
• Overlooking closing costs – Fees eliminate savings if you don’t plan to stay in the home long enough.
• Skipping the math – Crunch numbers to ensure your break-even refinance period.
• Not disclosing debts – Provide full transparency or it could jeopardize approval.
• Overstating income – Incorrect values trigger application denial or legal issues.
• Underestimating credit needs – Meet lender minimum credit score requirements.
• Missing documents – A disorganized application slows the process significantly.

Taking your time and double checking details is paramount for a seamless online mortgage refinance experience. Don’t rush through the steps.

Tips for a Successful Online Refinance

Follow these additional best practices when refinancing your mortgage completely over the internet:

• Use secure internet connections only – Avoid public Wi-Fi for sensitive financial transactions.
• Back up documents digitally – Maintain copies in multiple locations in case files become corrupted.
• Use the lender’s recommended upload process – Some reject files sent through unapproved methods.
• Check application status regularly – Communicate often with your loan officer about underwriting progress.
• Review all documents carefully – Don’t e-sign anything until you understand all terms and figures.
• Be available during closing – Remote online notarization requires real-time video calls for signing.
• Save communications records – Keep an organized paper or digital trail of all correspondence.
• Test drive the online customer portal – Familiarize yourself with account management tools ahead of closing.

With vigilance and good preparation, you can confidently refinance your mortgage from start to finish online while avoiding unnecessary roadblocks or delays.

Conclusion

Refinancing your mortgage using today’s online capabilities is incredibly convenient. But convenience comes with responsibility to do your research, provide all required information upfront, and carefully review every step of the process. Taking the time to choose a reputable online lender, shop rates wisely and get structured assistance when needed leads to success. With discipline and care, thousands of homeowners every month are able to capitalize on refinancing through the internet. Now armed with the insights in this guide, you have what’s needed to confidently consider making that move yourself.