Orange County homeowners with a VA loan are finding there are big advantages to the VA Cashout refinance program. This program actually does not require the loan being refinanced to be a VA loan, as long as the borrower is eligible for a VA loan. The biggest advantage of this program over most other cashout refinance programs is that the borrower can borrow money up to 90% of the properties value, while a Conventional loan allows cashout up to 80% loan to value, and FHA allows cashout up to 85% loan to value.
What is the Difference between a VA IRRRL and a VA Cashout Refi for Orange County Borrowers?
Orange County borrowers need to keep in mind a few of the differences between the popular IRRRL, or VA Interest Rate Reduction Refinance Loan, and a VA Cashout refinance. The IRRRL program is strictly a “Rate and Term” refinance, and the current loan needs to be a VA loan. Also, income is not verified, and in most situations, there is no appraisal. (Although there have been some changes to the appraisal requirements and some lenders are tightening up this program.) The VA considers any refinance that is not an IRRRL to be a cashout refinance. This means that if an Orange County VA eligible borrower wishes to refinance from a Conventional (Fannie Mae or Freddie Mac) loan, then even if they will not pull cash out, VA still considers it a cashout refinance and it must be underwritten as such.
VA Loans Are Flexible with FICO Scoring
Another big advantage for a VA cashout refinance versus a Conventional cashout refinance is the relative flexibility towards FICO scoring. For VA eligible borrowers with FICO scores under 700, if may make more sense to go with a VA loan even you only plan to pull cash out to 80% loan to value. Fannie Mae and Freddie Mac have instituted pricing “addons” which increase the fees and rate for cashout refinances when the FICO scores drop below 740. If your score FICO drops below 700, the pricing hits really start to add up. With VA, the pricing hits for low FICO’s are minimal.
VA Guidelines Regarding a Cashout Refinance
The actual VA guidelines allow for cashout to 100% loan to value, but finding a lender who will allow this will be difficult. Lenders tend to stay with the 90% rule, although there is some flexibility if the borrower is not actually getting cashout and the loan to value is over 90%. This is something that should be reviewed by an experienced Orange County VA loan officer prior to paying for an appraisal.
Authored by Tim Storm, an Orange County, CA Loan Officer MLO 223456– Please contact my office at Emery Financial Group for more information about an Orange County, CA home loan. 877-786-4243 x 7.
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