A VA refinance can be a great way take advantage of low interest rates in 2012, even if your Orange County property has lost most of its equity. It is possible to refinance into a VA loan from a non-VA loan up to 100% loan to value. Not only that, the VA loan limits are high. And VA 30 year fixed rates are low, even lower than most Conventional loan programs. The VA 100% financing limit in Orange County and Los Angeles County in 2012 is $621,000. But it possible to get a VA loan up to a loan amount of $1,500,000 with far less equity than a typical Jumbo lender would require.

Orange County 2012 VA Loan Limits

Near the end of every year VA will announce their new loan limits. In 2012, the loan limits for Orange County  is $621,000 up to 100% of the properties value. While most lenders will only allow a refinance up to 90% of the VA limit, there are lenders who do allow a refinance to 100% of the properties value, as long as the loan is within the 100% financing limit. While there are many eligible Veterans in Orange County, many of them are aware of the benefits of the VA program when it comes to refinancing. But with the drop in property values, more Orange County Veterans, who initially bought their home with Conventional financing, are finding that they can save hundreds per month by taking advantage of their VA benefits.

For example, an Irvine homeowner who financed their home in 2008 with a $500,000 Conventional 30 year fixed loan at 5.5% would have a payment of $2,838. Let’s assume the property was worth $600,000 in 2008. Now, 4 years later, the loan balance is down to approximately $470,000 and their property is also now worth $470,000. Their lender won’t refinance them since they don’t have 20% equity, and they also are not eligible for the HARP refinance program since their loan is not Fannie Mae or Freddie Mac.As of April 2012, VA interest rates are ranging between 3.75% (4.016 APR) and 4.25% (4.492 APR). Let’s assume the homeowner chooses a VA loan at 4%, which also allows for all closing costs to be paid using a lender credit. There is a VA Funding Fee equal to 2.15% based on this Veterans first time use of the VA eligibility. They end up with a new loan of approximately $480,000 (Funding Fee was $10,000). Their principal and interest payment would drop to $2,296, a $541 monthly savings. If the Orange County VA borrower was to continue to make the save payment on their VA loan as they were making on their 5.5% Conventional loan. They would end up paying their loan off 5 year sooner, savings over $175,000 over the life of the loan. This is only possible because of the flexibility of the VA loan program.

Jumbo VA Loan in Orange County to $1,500,000

This also works for loan amounts over the 100% financing limit. It is actually possible to get a VA loan up to $1,500,000. While 100% financing is not allowed over the $621,000 limit, very little equity, especially compared to a normal Jumbo loan program, is required. To figure out the loan amount allowed, take 75% of the  difference between the properties value and the Orange County 100% limit of $621,000. Add the difference back to $621,000 and that is the base VA loan amount. For example, let’s say a Newport Beach homeowner who is VA eligible owes $1,000,000 on a home that is  worth $1,221,000. By taking 75% of the difference between $621,000 and $1,221,000 ($600,000 x 75% = $450,000) and adding it back to $621,000, we find the base VA loan will be $1,071,000. This means the Newport Beach Veteran can refinance his VA loan up to 87.7% of the properties value, and at a great 30 year fixed rate with no monthly mortgage insurance. There is not a Jumbo lender out there that will even touch this program. But again, the key is the borrower need to be VA eligible.

The property does need a termite inspection and and items on the termite report cleared prior to funding. VA also requires an impound account for property taxes and insurance. Besides that, there are many benefits to a the VA refinance.

• Refinance to 100% loan to value with no mortgage insurance.
• Combine a 1st and 2nd mortgage or equity line up to 100% loan to value.
• Pull cash out up to 95% of the properties value.
• Refinance a st mortgage and “subordinate” a 2nd mortgage to 115% of the properties value.
• Very low 30 year fixed rates and 5 year ARM’s
• Flexible qualifying – relatively high debt to income ratios

While most Orange County property owners are not eligible for VA financing, those that are should research their options when they are looking to refinance. Finding a knowledgeable Orange County VA lender is an important step in determining whether a VA refinance is a viable option. The VA lender should be able to provide a detailed custom analysis that compares your current loan to a new VA loan.

Authored by Tim Storm, an Orange County, CA FHA and VA Loan Officer – Please contact my office at Emery Financial for more information about an Orange County, CA home loan.  Direct:  949-829-1846   MLO 223456