100% Cashout Refinance VA Loan

May 14, 2014 by

va cashout refiThe VA home loan is one of the very few, if not only, loan programs that allows for 100% financing. But what many Orange County Veterans eligible for a VA loan don’t realize is that it also allows for refinancing to 100% loan to value. And even better, it is possible to get “cash out” up to 100% loan to value, up to the local county loan limit. This means that in Orange County, if a Veteran owns a home that is worth the VA county loan limit of $679,650 (in 2018) then he can refinance up to that loan amount. And the loan being paid off does not need to be a VA loan.

Why Would Someone Want to Refinance to 100% Loan to Value?

Refinancing is not for everyone. And pulling equity out can be dangerous, depending on the purpose of the refinance and the strength of borrowers qualifications. But there are plenty of reasons why this is a viable option for some.

  • Home Improvements – It’s not easy to get a construction loan these days. And even if you can get a construction loan it will typically come with restrictions on disbursements to contractors, high costs, etc. With VA, if there is any equity at all you can access it and without restrictions on its use.
  • Debt consolidation. For those home owners who have debts that are holding them back, being able to refinance and consolidate those debts into one loan can suddenly free up cash flow. For those looking to consolidate debt, a smart plan would be to look at using some of the monthly savings to accelerate the principal pay down on the new mortgage after building up a solid emergency reserve account.
  • College expenses. Kids grow up fast. And college is more expensive than ever. Using built up home equity is just another way to help pay tuition without dealing with student loans. Mortgage rates do tend to be lower than student loan rates.
  • Investments. For some, it may make sense to pull equity out for other investments. Hopefully, safe investments.

What to Consider when Refinancing

There are several important considerations when refinancing.

  • How long do you plan to remain in the home and/or loan? With any refinance you want to make sure you “break even” before you are out of the home or loan. Many times a VA refinance can be closed with the lender covering closing costs with a “lender credit”. However, unless you are a disabled Veteran qualifying for a Funding Fee waiver, then expect a full Funding Fee of 3.3% to be tacked onto the back end of the loan. If your plan is to sell the home soon, then a VA cashout refinance may not make sense.
  • What is your current interest rate and how much cash are you trying to pull out? Depending on current rates, it may or may not make sense to get a new 1st mortgage. For example, someone who has a 30 year fixed rate of 3.25% may not want to give that rate up, especially if they really don’t need much cash. Maybe an equity line 2nd is a better option.

Find out if a VA Refinance is Right for You

The best way to find out if a 100% VA cashout refinance is right for you is to talk to a VA loan officer who should be able to provide custom loan scenarios with details on the new loan amount, payment, closing costs (and any lender credit to offset closing costs), and amount of cash out. The loan officer should also be able to provide a Side by Side Analysis of your current loan to the new VA loan and other possible refinance solutions.

Authored by Tim Storm, a California VA Mortgage Loan Officer MLO 223456 – Please contact my office at the Home Point Financial NMLS #7706. Direct line at 949-640-3102. www.OrangeCountyVALoans.com

Filed Under: VA Cash out Refinance, VA Refinance Loans Tagged With: ,

Refinance FHA Loan into VA Home Loan

December 5, 2013 by

Many times Veterans will use an FHA loan to buy a home when the better option would have been a VA home loan. This happens in Orange County quite often. The reason tends to be because there a lot of lenders in Orange County who don’t understand the VA home loan program and think it is a difficult program close. And of course, that is not true.  This is also why a Veteran looking to use VA financing in Orange County should track down an experienced VA lender in Orange County. Getting back to the point of this article, what happens when a VA eligible home buyer uses FHA financing to buy a home? Well, probably the first option to consider is to refinance FHA loan into VA home loan.

Advantages of a VA Home Loan over an FHA Home Loan

  • VA will allow financing up to 100% of the property value. So while the 3.5% down payment is already a part of the equity in the home, refinancing into a VA loan almost immediately shouldn’t be an issue, at least not based on property value.
  • VA does not have monthly mortgage insurance like FHA does. The current monthly mortgage insurance factor used by FHA is 1.35% of the loan amount divided by 12. In Orange County, where a $500,000 loan is fairly common, the monthly mortgage insurance would be approximately $562. ($500,000 * .0135 / 12 = $562). That is over $6,500 per year. A VA loan will not have this monthly payment. Also, for FHA loan closed after June 3, 2013, the monthly mortgage insurance NEVER goes away. Ouch.
  • VA is actually easier to qualify for than FHA when it comes to debt to income ratios (lower payment with no mortgage insurance helps) and credit. For those who have had a previous foreclosure or short sale, VA only requires a 2 year wait period where as FHA requires three years.
  • Once in a VA loan, the Veteran will be able to take advantage of the Interest Rate Reduction Refinance Loan, or IRRRL, which is also known as a VA Streamline Refinance. There is no appraisal and no income documentation.

refinance an fha loan into va home loanThe Process of Refinancing From FHA to a VA Home Loan

Refinancing from an FHA loan to a VA home loan is a “full documentation” loan. The lender will require a review of two years tax returns and W2’s, paystubs for the most recent one month, a credit report, and full appraisal. It is also important to note that a clear termite inspection report will be needed prior to closing. Also, similar to the FHA Upfront Mortgage Insurance Premium, which is financed into the FHA loan, VA has a Funding Fee which is financed into the loan. For Veteran who have never used their VA before the VA Funding Fee will be between 2.15% and 2.4%, depending on the Veterans eligibility. However, Veterans who received some sort of disability pay from the Veterans Administration will most likely get their Funding Fee waived. The lender will be able to submit the VA Form 26-1880, Request for Certificate of Eligibility, which will spell out whether or not there will be a Funding Fee.

Before filling out a loan application and paying for the appraisal, the Orange County Veteran should consult with an Orange County VA loan officer who can prepare a custom Side by Side Analysis showing the potential benefits and/or costs of the refinance.  Because of the high FHA mortgage insurance, a refinance will quite often make sense for the Veteran. But a refinance doesn’t make sense every time. The borrower should check what the break even time period for the refinance is, and take into account how long they plan to remain in the home. A thorough analysis prepared by a trusted lender should give the Veteran the numbers they need to make an educated decision.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com

Filed Under: VA Refinance Loans

How to Refinance from a Cal-Vet Loan to a VA Home Loan

November 25, 2013 by

It is possible to refinance a Cal-Vet home loan. You just have to do it into a new VA home loan. One of the downsides of the CalVet home loan program is that you cannot refinance when interest rates drop. While the VA home loan program offers one of the best refinancing options around, the Interest Rate Reduction Refinance Loan, or IRRRL, CalVet is available only for purchases.

Why CalVet will not Allow a Refinance

When a home is purchased using a CalVet loan, it is actually closed using a Contract of Sale. This is different than a standard loan closing. With a Contract of Sale, it is actually CalVet who purchases the property you select and then takes legal title to the property at the close of escrow. CalVet then turns around and sells the property to the Veteran using the Contract of Sale. CalVet can’t refinance the current loan according to both federal and state laws. Also, because the interest rate is tied directly to the tax-exempt bond used as the funding source of the home, the borrower is locked into the interest rate, even if rates drop.

Refinance into a VA Home Loan

The solution is to refinance into a VA home loan.  This can either be a VA IRRRL or a “cashout” VA refinance. A VA IRRRL does not require an appraisal and there is no income documentation needed. If a CalVet borrower wants to access their equity, whether it be for debt consolidation, home improvement, or some other purpose, then a VA cashout refinance is the way to go.  An appraisal is required and the loan cannot be more than 90% of the property value. This would be a full income documentation loan and can carry a big VA Funding Fee for those Veterans who do not have a service-connected disability rating.

Reasons Why a CalVet Borrower Would Want to Refinance

  • To pull cash out for home improvement or debt consolidation. Property values are on the rise, which means many CalVet borrowers now have equity in their homes. They can refinance into a VA loan to pull cash out for home improvements or debt consolidation. VA allows for cashout refinancing up to 90% of the appraised value.
  • Lower their interest rate and payment. Many CalVet borrower’s interest rates are still above 4%. VA home loan interest rates adjust based on the current market and are now low enough that it makes sense to review your options for lowering your interest rate and payment.

First Step in Determining if a CalVet Refinance is Right for You

The first step in determining whether a refinance from a CalVet loan into a VA home loan makes sense is to contact a California VA home loan specialist.  The VA home loan officer should be able to prepare custom loan scenarios with details on the new loan amount, payment, and closing costs involved in a refinance. Many times there can be a lender credit that will offset some or all of the closing costs. It is important that the Veteran understand the loan process before starting the refinance. A clear termite report will be required for cashout refinancing (not the VA IRRRL). Also, a VA Funding Fee is required, except for those Veterans who have the disability waiver (10%).  The loan officer will be able to review all options and educate the Veteran on the pro’s and con’s of a refinance.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at Fairway Independent Mortgage Corporation. Direct line is 949-829-1846. www.OrangeCountyVALoans.com

Filed Under: VA Cash out Refinance, VA Refinance Loans

VA Refinancing Options For Eligible Orange County, CA Homeowners

July 9, 2013 by

Orange County VA Loan ApprovalVA mortgage loans allow eligible Orange County Veterans to refinance their home to take advantage of lower interest rates that can ultimately save you sizable sums of money in both the long-run and the short-run by lowering your monthly payment. What many don’t realize is that the current loan does not need to be a VA loan.

Many Orange County home owners are finding that if they currently have a Conventional loan, they can refinance into a VA loan if you are an eligible veteran or member of the armed services. Transferring from a Conventional mortgage to a VA mortgage is known as a “Conventional to VA Refinance Loan” and is a very straightforward process. Technically, VA considers a refinance from a non-VA loan into a VA loan to be “cash out”, even if the borrower is not getting cash back. And while many lenders will only allow a Conventional to VA refinance up to 90% of the properties value, there are lenders who closely follow VA guidelines and allow for 100% loan to value financing. In Orange County, where the VA 100% financing limit in 2013 is $668,750, this opens a lot of possibilities. And don’t forget, many lenders will finance up to a $1,500,000 VA loan. Some equity is required when the loan is greater than the 100% limit, but not as much as would be required for a “Jumbo” Conventional loan.

The “Conventional to VA Refinance Loan” process is described in detail in our article Can I Qualify For A VA Refinance If I Currently Have A Conventional Loan?

A common question related to VA refinancing is whether or not you combine a Conventional 1st mortgage with an equity line or fixed rate second mortgage. The answer is…you can! Even if the 2nd is greater than 100% of the properties value it is still possible to combine a portion of the equity line with the first mortgage and “subordinate” the remaining 2nd mortgage. There are loan to value restrictions in this scenario, typically capping out at 115% of the properties value.

VA IRRRL for Orange County Homeowners

Of course, you are also allowed to refinance your home if you currently have a VA mortgage. An Interest Rate Reduction Refinance Loan (IRRRL) is also known as a VA Streamline Refinance.  This is a fast and easy way to lower your monthly mortgage payment and interest rate! And typically with the lender using a “lender credit” to cover some or all of the closing costs.

Some of the benefits of a VA Streamline Refinance or IRRRL include:

  • In most cases you will not need to have an appraisal prepared. This saves time and cost.
  • No income verification. Remember when you purchased your home and had to provide two years income documentation, paystubs, first born and a pint of blood.( Just kidding.)  The IRRRL program is “streamlined”, meaning its a very easy process. The lender will verify you have a job, but does not ask for income documentation. As a matter of fact, the income section of the loan application is left blank.
  • An extremely low VA Funding Fee – only 0.5%. And in many cases the lender can provide a loan scenario where even the VA Funding Fee is covered with the “lender credit.”

Consult with an Orange County, CA VA Loan Specialist

It is important to make sure to talk with a VA loan specialist. VA financing tends to be specialized.  The guidelines for VA financing are much different than for Conventional loans, and consulting with a loan officer who is not familiar with VA financing may result in answers that are not correct. So make sure you are getting the correct answers to your questions when it comes to VA financing.

Filed Under: VA Cash out Refinance, VA Mortgage, VA Refinance Loans Tagged With: , ,

VA Loan Refinancing Picks up in Orange County, CA

November 20, 2012 by 1 Comment

refinance to va loanVA loan refinancing has picked up quite a bit in Orange County in 2012. And it’s not just current VA borrowers taking advantage of the VA to VA Interest Rate Reduction Refinance Loan, also known as the IRRRL. Veterans are also refinancing out of Conventional loans and into VA loans.

Why Refinance from Conventional to VA?

VA loan guidelines offer several advantages over typical Conventional loan guidelines. Lower FICO score requirements, less equity, higher debt to income ratios, and less time needed after a foreclosure or bankruptcy are all reasons why VA refinancing has been so popular in 2012. Also interest rates on a VA loan tend to be as low or sometimes lower than other types of loans. And while VA does have a Funding Fee which is financed into the loan, there is no Monthly Mortgage Insurance which is typical for other high loan to value financing.

Orange County has high loan limits for VA Financing

Orange and Los Angeles counties have high 100% financing limits for VA loans. It is possible to buy or refinance with no down payment or equity up to a $687,500 (2014 limit) loan amount. That is higher than the high balance Conforming loan limit of $625,500. Plus, it’s possible to get financing as high as $1,500,000. There is an equity requirement when the loan is over $687,500 equal to 25% of the difference between the appraised value and the 100% limit. For example, if an Orange County Veterans home appraises for $887,500 then the max VA loan would be $837,500.

How do you know if a VA loan is for you?

A VA loan is not the best loan in every situation. It’s important to compare your options. Find a local Orange County lender who specializes in VA financing. Have the lender prepare a custom Side By Side analysis comparing your current loan to a VA loan and whatever others options that are available.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com

 

Filed Under: VA Refinance Loans
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