Why VA Loan Refinancing in Orange County is Popular

January 7, 2015 by

VArefinanceAs we begin 2015 a wave of VA refinance activity in Orange County, CA that started in the last quarter of 2014 is continuing. There are several different types of VA refinances and different reason for each type of refinance.

Different Types of VA Refinance Loans

  • VA IRRRL – also known as the VA Interest Rate Reduction Refinance Loan, or VA Streamline Refinance. This program is strictly for someone who already has a VA loan and is looking to lower their interest rate and payment. The VA loan program has been widely utilized in Orange County over the past few years as a great way to buy a home with no down payment. With a drop in interest rates many VA borrowers are finding that the VA IRRRL program is an easy way to lower their payment. Most lenders do not require an appraisal for this program. There is no income documentation, no termite inspection. It is a very “streamlined” program where most lenders can even use a lender credit to cover all closing costs and prepaid expenses. It doesn’t take much of a drop in interest rates for this program to be utilized.
  • VA Cash out Refinance – when a current VA borrower wishes to pull some equity out of their home then the IRRRL program is not an option. The loan is then a “cash out refinance”. A full appraisal is needed, along with a clear termite report. This is a fully qualifying loan. But for those who are planning to use the cash to consolidate other debts or improve their home a VA cash out refinance is a great option. VA allows the borrower to pull cash out up to 100% of the appraised value. VA is the only type of loan program that allows for 100% cash out financing, making this a very popular loan option.
  • Non VA to VA Refinance – You don’t have to have a VA loan to refinance into a VA loan. (you do for the IRRRL program, but not for a non-IRRRL). For someone with a Conventional or FHA loan who wants to either refinance to lower their rate and payment, or refinance to pull cash out for home improvements and debt consolidation, the VA program can be an excellent option. Conventional financing can get expensive when the loan to value is higher than 80%. For an Orange County homeowner with less than 20% equity who wants to avoid paying mortgage insurance, the VA program offers a great solution. VA does not have monthly mortgage insurance and tends to have very aggressive 30 year fixed interest rates. And of course, it is the only way to actually pull cash out up to 100% of the properties value. Plus, once in the VA loan you will be eligible for a VA IRRRL if rates go lower, which is the easiest way to lower your interest rate (for those who are eligible.)

Important Things to Know When Refinancing into a VA Loan

There are some things that are different about the VA program compared to other types of financing. For one, the borrower needs to be an eligible Veteran. The lender can help retrieve the Certificate of Eligibility from VA. Also, below are things to know about the VA program.

  • The VA loan limit in Orange County for 100% financing is $625,500 (2015 loan limit). This means it is possible to refinance a VA loan up to $625,500 at 100% loan to value. For those who already have a VA loan, they can take advantage of the VA IRRRL program even if their current VA loan is above that limit. The VA loan limit does vary from county to county, so its important to talk with an experienced VA loan specialist who can make sure you are calculating your loan amount correctly.
  • The VA Jumbo loan is a great option for loan amounts above the 100% loan limit of $625,500. Some lenders will fund VA loans as high as $1,500,000. Some equity is required when going above the 100% loan limit, but not much, especially when compared to other types of financing.
  • A clear termite report is required for non-IRRRL VA refinances. Section 1 items on the report will need to be signed off, and quite often Section 2 items will also need to be cleared.
  • The VA Funding Fee for IRRRL’s is .5% of the loan amount (unless the Veteran has a disability waiver). The VA Funding Fee for non-IRRRL refinances will range from 2.15% to 3.3%, depending on whether the VA borrower has used their VA eligibility for a VA loan previously. The Certificate of Eligibility from VA will determine what the Funding Fee percentage will be. In some cases the lender may be able to offer an option where a lender credit can offset the VA Funding Fee.
  • It can take less than 30 days to close a VA refinance, provided the VA borrower quickly forwards the requested loan documentation to the lender.

The first step in determining whether it makes sense to refinance into a VA loan or take advantage of the VA IRRRL program is to talk with a local Orange County VA loan specialist. The VA loan officer should be able to provide several custom VA loan scenarios, along with a Video explanation of the loan options. Working with a lender who makes sure you are making an educated decision based on your long and short term financial goals is extremely important, since your home will be one of the biggest financial purchases you will make.

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. I prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Filed Under: VA Cash out Refinance, VA IRRRL - Streamline Refinance, VA Refinance Loans

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: ,

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: , ,

Refinance to VA Loan from Conventional Loan in Orange County, CA

April 15, 2012 by 3 Comments

refinance to va loanA 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

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