1. Pre-Closing Preparation

• Final Loan Approval: Before closing, the lender will conduct a final review of your application, ensuring all the paperwork is in order and the property valuation (appraisal) aligns with their expectations.

• Title Search and Insurance: The title company will perform a title search to make sure the home doesn’t have any outstanding liens or legal issues. You may also need to purchase title insurance to protect both you and the lender in case a problem with the title arises in the future.

• Loan Documentation: Your lender will prepare all the closing documents that outline the terms of your new loan, including the loan amount, interest rate, repayment schedule, and other legal terms.

2. Reviewing Closing Disclosure

• Closing Disclosure: At least three business days before your closing date, the lender is required to provide you with a Closing Disclosure. This document contains all the final details of your loan, including:

  • Loan amount

  • Interest rate

  • Monthly payment

  • Total closing costs (including fees for origination, appraisal, inspection, title search, and insurance)

  • Any prepaid interest

• Review the Closing Disclosure: It’s critical to review this document carefully to ensure everything matches what you’ve been told and agreed upon. If there are discrepancies, address them with your lender before the closing.

3. Closing Meeting

• Location: The closing typically takes place at a title company’s office, your lender’s office, or even remotely, depending on your lender and location.

• Parties Involved: You’ll meet with a closing agent (who works for the title company or your lender) who will guide you through the documents. The lender’s representative may also be present, but most of the time, the closing agent handles the process.

• Reviewing Documents: You will sign various documents related to the refinancing, including the new loan agreement and the deed of trust (or mortgage). These documents officially state that the new loan will pay off the old one and that you are agreeing to the new terms.

  • The Promissory Note outlines the promise to repay the loan.

  • The Deed of Trust/Mortgage gives the lender the right to foreclose if you fail to repay the loan.

4. Funds Disbursement

• Paying Off the Existing Mortgage: One of the most important actions that occur during closing is that the funds from the new loan are used to pay off the balance of your old mortgage. This is usually handled by the closing agent or the lender, who will pay off the old loan directly.

• Remaining Funds: If you’re refinancing for cash-out (where you borrow more than your original mortgage), the additional funds are given to you in a lump sum or transferred to your bank account after paying off your old mortgage.

• Escrow Account Setup: If your new mortgage includes an escrow account for taxes and insurance, the lender may collect this at closing as well. The amount depends on your property taxes and insurance premiums.

5. Closing Costs

• Paying Fees: Closing costs generally range from 2% to 5% of the loan amount. These costs can include:

  • Loan origination fees

  • Title fees

  • Appraisal fees

  • Inspection fees

  • Prepaid interest

  • Prepaid property taxes and insurance premiums

• You may have to pay these fees upfront at the closing meeting. However, some lenders may allow you to roll these costs into your loan.

6. Signatures and Finalization

• Sign the Documents: Once you review all the documents and are comfortable with the terms, you’ll sign them to officially close the refinance transaction. This includes:

  • The Refinance Loan Agreement

  • The Note

  • The Deed of Trust/Mortgage

• Final Review: After signing, the closing agent or lender will conduct a final review of all documents. If everything is correct, they will submit them for filing with the county or local property records.

7. Loan Funding and Recording

• Loan Funding: Once all the documents are signed, the lender will fund the loan. This means the funds are officially transferred and the old mortgage is paid off. Your new lender will handle this payment, and your previous lender will be informed that the loan has been settled.

• Recording the Mortgage: The deed of trust (or mortgage) will be recorded with your local county office. This makes the refinancing official, ensuring that the lender’s interest in the property is legally acknowledged.

8. Post-Closing

• Confirm the Loan Payoff: After closing, make sure that your old mortgage lender provides you with a payoff statement confirming that the original loan has been paid off. Also, ensure that your new mortgage lender confirms your monthly payment schedule.

• New Monthly Payments: Start making payments according to the terms of your new refinance agreement. If you have set up an escrow account, your new lender will begin managing property taxes and insurance payments for you.

Key Considerations at Closing:

• Prepare Funds: If you need to pay any closing costs out of pocket, ensure you have a certified check or wire transfer ready to cover these costs.

• Have Identification: Bring identification (e.g., a government-issued ID or passport) to the closing, as it’s required to confirm your identity.

• Ask Questions: If anything is unclear during the closing, ask the closing agent or your lender for clarification before signing.

In summary, the closing step in a refinance involves the final review, signing of documents, and the official transfer of funds to pay off your old loan, followed by the disbursement of the new loan. Afterward, you’ll start following the terms of your new mortgage agreement. It’s essential to stay alert and informed throughout this process to ensure everything proceeds smoothly.