13 simple steps to refinance

Step 1: Take stock

The first step to a new mortgage is taking stock of your old one. Gather your:

• Latest mortgage statement. If you don't have it, ask your lender for a copy. Look for your current interest rate.
• Annual property tax. Can't find last year's tax notice? Visit your county assessor's office, in person or online. Or ask your mortgage company if it includes taxes in your monthly payment and submits tax payments for you.
• Insurance statement. Find your monthly or quarterly insurance statement to find the cost of your premiums. Ask the mortgage company if it pays your insurance premiums out of an escrow account.
• Credit score. You probably have a rough idea of your score. That's all you need at this point. If you really don't know, you can estimate it using MSN Money's credit-score estimator or request a version free from online sites such as CreditKarma, Quizzle or Credit.com. (This will not be the same one your mortgage lender will use.)

Read:  Why we refinanced: 3 homeowners' stories

• Video: 15-year fixed or 30-year fixed?

• What's the best interest rate you can get?

Step 2: Quiz yourself

Before getting started, decide what you want from a refi and whether it's worth it, says Cara Hawkins, sales manager at AmeriPro Funding, a real-estate and mortgage-services company in Austin, Texas. Play around with a refinance calculator to see what refinancing might do.

"The idea is to get yourself in a better position than before," says real-estate attorney Dale Robyn Siegel, owner of Circle Mortgage Group in Harrison, N.Y. "That's not necessarily trading a 30-year fixed-rate mortgage for a 30-year fixed-rate mortgage with a lower payment."

Shortening the term might boost your retirement; 29% of borrowers took shorter loans in the third quarter of 2012, according to the most recent numbers from Freddie Mac. Maybe you need to take out cash. Paying down your balance could get you a better rate. In the last quarter of 2012, 39% of refinancers paid down the loan balance, according to Freddie Mac.

• Bing: How low are interest rates this week?

• Video: Death of the refi?

• MSN Money: Is the low interest rate party over?

Step 3: Take names

If you're still in the game at this point, ask friends and family for names of mortgage lenders that they've used and can recommend. "They'll definitely have a list of people not to use," Hawkins says.

Yes, you can just go online for rate and fee comparisons. But good service can't be assessed online. "Everything does not come down to rate and fees. If you can't get to closing, the rate and fees that you were quoted are irrelevant," Hawkins says.

Good to know: Bigger banks may be limited to offering only their own products. For a personal-shopper experience, use a mortgage broker or mortgage banker who offers many loan products. Anticipate trouble qualifying? Try a community bank. If you demonstrate you're a good risk, a community bank might consider your circumstances, at a slightly higher cost.

• Video: Should you switch to a shorter-term mortgage?

• On our blog, 'Listed': New federal rule: Make sure borrower can pay loan

• What are homes worth near you?

Step 4: Find your style

People vary plenty in communication styles. Some want face-to-face encounters with a lender, at least to start.

"I'd want someone that I could reach out and strangle if there's a problem," says Richard Booth, certified mortgage banker with America's First Funding Group in Neptune, N.J.  Even if you usually spend lots of time online, if you like being in the same room with your banker or broker, stay local and avoid Internet mortgage shops.

Other borrowers have no desire to meet their lender. They'd rather talk by phone or email. Whatever your style, Booth says, remember that you could work closely with this lender for two or three months, so find which approach will make you happiest.

• Bing: How low are interest rates this week?

• Video: Death of the refi?

• MSN Money: Is the low interest rate party over?

Step 5: Go shopping

Grab your documents from Step 1 and shop around. Talk – in person, online or on the phone — with two to four lenders about your finances, your plans and the approximate value of your home. These are no-commitment chats to help you learn about interest rates, fees and service of each lender.

Lenders will tell you if you qualify, how much you can borrow and likely costs. They should describe various options — for example, the rate for loans of different terms, with and without "points" — a charge, equal to 1% of your loan amount, for buying down the interest rate.

To do:

• As you meet lenders, imagine what it's like to work with them.
• Collect written, itemized copies of estimated rates and fees you are quoted.
• Ask how many days, on average, a lender needs to close a refinance and what happens if your rate lock expires before your loan closes.

Read:  Why we refinanced: 3 homeowners' stories

• Video: 15-year fixed or 30-year fixed?

• What's the best interest rate you can get?

Step 6: Give your current lender a chance

Reach out to the company holding your mortgage now. Say you're shopping for a refinance and ask what they can do for you.

You might be able to get a "streamlined" refinance, Siegel says. You still apply and pay for an appraisal, but the process is simplified. "Instead of going through 30 steps, maybe you're going to go through 20 steps," she says. You could also save a couple hundred dollars if your lender agrees to waive the company's underwriting fees.

• MSN Money: Try a refinance calculator

• Video: Refinancing at low rates helps homeowners

• On our blog, 'Listed': Will new rules change the game for mortgage servicers?

• Bing: Where do experts expect interest rates to head this year?

Step 7: Hold off applying

Don't make an application yet, even if a lender urges you to. Why? A formal application lets the lender "pull" your credit score. Multiple credit inquiries, even by the same lender, can hurt your score — the last thing you need right now. If you're a borrower with marginal credit, it can make a huge difference, Hawkins says.

"Don't let anybody run your credit until you've decided you're going to do business with them," Siegel advises. That includes completing loan applications with online lenders.

In fact, Siegel says, from now until your loan closes, don't apply for credit for any reason. "Don't buy a car; don't co-sign for your brother's car loan; don't open a credit card. Just leave everything the way it is until after you've closed."

• Bing: How low are interest rates this week?

• Video: Death of the refi?

• MSN Money: Is the low interest rate party over?

Step 8: Decide

Review your results. Lay out the estimates you collected and compare the rates and fees. They'll probably look a lot alike.

Use your gut instincts to narrow the decision. Eliminate lenders you didn't really like or trust – no need for a reason. "You have to decide what personality is right for you. It's like dating, almost," Siegel says.

Toss out anyone who made you feel even a bit pressured. Good lenders are interested in helping you improve your financial life, not just in selling you products. "If somebody can't answer your questions or you feel like you are getting the runaround, scratch them off your list," Hawkins says. 

Choose a lender who seems good at hand-holding and who responded knowledgeably and quickly. Refinancing is stressful, Booth says. "The last thing you need is to deal with a company that's not responsive to your needs."

• Video: Should you switch to a shorter-term mortgage?

• On our blog, 'Listed': New federal rule: Make sure borrower can pay loan

• What are homes worth near you?

Step 9: Now, apply

Contact your new lender to say you're on board. Ask for a step-by-step explanation of what to expect and a complete list of documents to submit.

Discuss whether to pay the fees in cash at closing or add them to the loan amount. Go that route and you'll pay a higher rate but avoid paying the $3,000 or so in cash at closing. Ask how long it would take to pay off the fees if they're included in the loan. This makes sense if you'll sell or refinance before your fees are paid off. After the "break even" point, you're paying extra interest every month.

After you submit an application, a lender has three business days to give you a good-faith estimate (PDF) showing all the loan costs. Your final bill can't vary much unless circumstances change — your credit score or home appraisal is lower than expected, for example.

• Bing: How low are interest rates this week?

• Video: Death of the refi?

• MSN Money: Is the low interest rate party over?

Step 10: Expect delays

Refinancing is not easy or quick. Low rates keep lenders inundated with applications, meaning it could take 60 or 90 days to close. "If anybody tells you they can close you in two weeks, they're lying," Siegel says.

Before the mortgage meltdown, you'd turn in documents and wait for the lender to tell you your loan was approved. Now, after handing in every document requested, you may face new demands as lenders' underwriters examine your application with a fine-tooth comb.

You could be asked, for instance, to prove where you got any unusually large (for you) bank deposits. Or to produce divorce papers, even if you qualify for the loan without your child-support payments. After a month goes by, you may need to submit fresh bank statements and pay stubs.

• Video: Should you switch to a shorter-term mortgage?

• On our blog, 'Listed': New federal rule: Make sure borrower can pay loan

• What are homes worth near you?

Step 11: Endure the appraisal

Your appraisal could be a curve ball. With home prices unstable and lots of foreclosures, appraisers have had trouble finding recent similar, nearby sales to judge a home's value.

Real-estate markets are improving, though. The problem varies by city and by neighborhood. A low appraisal could require you to pay more or accept a smaller loan. It could prevent you from refinancing at all.

There's not much you can do. Don't try to contact the appraiser. Siegel says these two action items might help:

• Clean up the house so it makes a good impression.
• Ask your lender if the appraiser will accept your written suggestion of nearby recently sold homes ("comparables") that you think are similar to yours. (Here's how to find them.)

Read:  Why we refinanced: 3 homeowners' stories

• Video: 15-year fixed or 30-year fixed?

• What's the best interest rate you can get?

Step 12: Lock the interest rate

"Locking" an interest rate means getting a guaranteed rate — or rate and points — for a defined time, maybe 30 or 60 days.

The lock protects you from rising rates. But it means you're committed even if rates fall. "Lenders should not charge you for a rate lock, although they can ask for a reservation fee, which is refunded 100% at closing," Booth says.

Efficiency is key. Don't keep your lender waiting while you take four days to find your 2009 tax statement during the lock period.

"I usually don't recommend locking a loan until the appraisal is complete and all documents are received from the borrower," Booth says. That's because it's hard to predict how long the appraisal will take. If your lock expires before the loan closes, you lender may extend it. Don't assume, though. Ask.

• Bing: How low are interest rates this week?

• Video: Death of the refi?

• MSN Money: Is the low interest rate party over?

Step 13: Close the loan

Hooray! Are you ready for closing day, when you sign the loan papers, pay off your old mortgage and assume the new one? You'll be asked to sign a big stack of legal documents. Some states require you to use an attorney. Others don't.

Regardless, prepare to spend the time you must carefully read every line of every document you're given. Don't sign anything you don't understand. If you're more comfortable getting help, hire a lawyer for a few hundred dollars. It's money well-spent.

• MSN Money: Try a refinance calculator

• Video: Refinancing at low rates helps homeowners

• On our blog, 'Listed': Will new rules change the game for mortgage servicers?

• Bing: Where do experts expect interest rates to head this year?