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Steps to Get a Cash-Out Refinance


The Spire

The procedure of closing a cash-out refinance isn’t very different from that of a traditional mortgage refinance. It’s a fairly simple process, and as long as you meet all the requirements, you should have a simple time applying and getting a cash-out to refinance. 


Step 1 – Find Out the Minimal Requirements for Cash-out Refinance 

Before you can start comparing various rates for this type of refinancing, you need to know the minimal requirements. This step plays a critical role in preparation. Different lenders may have varying terms. But quite often, these terms are almost the same. For instance, you must have a good credit score: the higher your score, the more chances you have for qualifying for a cash-out refi. 

The other mandatory requirement is a debt-to-income ratio of less than 50%. Please note that a lower DTI ratio is more appealing to lenders since it shows that you can repay the loan. The last requirement you must tick is having a considerable amount of equity. That shouldn’t be a problem if you have been paying monthly mortgage premiums for several years. 


Step 2 – Determine How Much Money You Will Need to Cash-out 

After figuring out the minimal requirements for this new mortgage, the next step is to identify how much money you will need. The amount of equity you have built will determine the amount of money you can cash out from this refinance. It’s worth noting that the amount is never 100% equity. You must leave a small percentage as a down payment.

It would be wise to only cash out the amount you need. This is why you have to figure out estimates of the projects you want to fund using this money. If it’s a home renovation, ask for estimates from contractors. In case the money is for college tuition, make sure you have the exact figure in mind. This will ensure you don’t borrow more or less from your cash-out refinance. 


Step 3 – Compare Cash-out Refinance Rates 

This is the part that will require some research. Not all lenders offer similar terms. Some have lower rates. And with cash-out refinance, finding a much lower rate is critical. So, feel free to shop around inquiring about rates and fees. It’s okay to ask for referrals from friends and family. 


Step 4 – Choose the Lender with the Best Terms and Make an Application 

From the research done in step 3, you should have identified a specific lender with favorable terms and a lower interest rate. After making sure that you meet their requirements, you can make an application. 

The lender will ask for supporting financial documents such as W-2s, bank statements, and pay stubs to confirm your debt-to-income ratio. The lender may also perform a credit score check. This is necessary since it helps the lender know whether you are a suitable candidate for a cash-out refinance. 


Step 5 – Get a Home Appraisal 

All types of property are known to either appreciate or depreciate. For the lender to know the current value of your home, an appraisal is mandatory. An appraisal can be defined as an unbiased opinion of your home’s value conducted by a professional appraiser. Real estate appraisers are certified third parties that determine a home’s value during buying, selling, or refinancing a property. 


Step 6 – Application Review and Approval 

Using the documents provided above and the checks performed, the loan underwriter will go through your application and either reject or approve it. If you have met all the requirements, you don’t have to worry about your loan being granted. 


Step 7 – Sign Closing Documents and Get Your Cash-Out 

This is the final step where you will be required to sign and close the refinance. Your lender will guide you in this step, and it’s where closing costs are deducted. 

Homeowners interested in cash-out refinance need to know that the money isn’t given right away. You have to wait a couple of days before the check is disbursed. There is often a rescission period where homeowners have the right to change their minds. This rescission period is longer on primary residences. The checks arrive much sooner after closing the cash-out refinance for second homes or investment properties. 


Applying for a cash-out refinance isn’t difficult. You mustn’t skip any step since that may affect the terms of your new offer. 

A Lending Hand for Financing Home Mortgages

Spire Financial (A Division of V.I.P. Mortgage, Inc.) brings lending expertise to you. All of our loan officers offer personalized communication for every client, guiding them through the process. We can show you ways to maximize your finances and unlock future opportunities. Spire Financial keeps you in control of refinancing, debt consolidation, and home equity. Together, we can achieve your financial goals.