Today’s mortgage lending environment is becoming more and more difficult for borrower to get approved for mortgage refinance traction. Since the housing market began to turn lenders have started to tighten up their underwriting standards making it harder for borrower to get approved. Fortunately, for veteran borrowers they have two very flexible transaction options to ease the approval process through their own VA home loan program.
VA Interest Rate Reduction Loan (IRRL)
The 1st option is something called a VA Interest Rate Reduction Loan (IRRL). This is a loan where the veteran borrower already has a VA home loan and would like to refinance down to a lower interest rate given the current market interest rates. The amazing benefit of this loan is that it’s incredibility easy to get approved. There are no appraisals required so value is not of a concern. There are no minimum credit scores; however, some investors and large banks have started requiring minimum credit scores recently.
The paperwork needed to process these loans is minimal at best. There are no paystubs, W2s, or bank statements required. One thing to watch at for is with such easy credit standards veterans become very susceptible to unscrupulous lenders that are more than willing to take advantage of borrower. The majority of my previous clients are receiving unprecedented amount mailers that make it seem that VA rates are lower than that actually are. So please watch out for your closing costs when proceeding with caution with such a transaction.
Summary of the VA IRRL
· VA to VA loan rate and term rate reduction
· Appraisal, income docs, or asset docs are not required
· Verification of the past 12 months of mortgage payments, and minimum credit scores may be required
· 1 or 2 skipped mortgage payments
· Up-to 2 discount points may be rolled into the loan
Cash out or rate and term VA refinance
The 2nd option is what is considered a full VA refinance transaction with an appraisal, and all of the other normal documentation i.e. paystubs, W2s, ect. The nice thing about this loan is that it allows borrower to refinance all the way up to the current value of the veterans home. That’s right 100% financing on refinance transaction for not only borrowers who are looking for rate and term refinancing coming out off an ARM or another conventional loan but also for cash out refinance transactions as well. So veterans that want to consolidate debt, do home improvement projects, or for other various reason are allow. In addition, to this the VA loan will allow VA jumbo loan refinance transactions that are over $417,000 or some in high cost areas. But another word of warning the guidelines for VA jumbo refinance transactions can get very complicate so please make sure your loan officer is very familiar with VA loan or you could really get yourself into some problems.
Summary of VA Cash out Refinance
· Cash out refinances up to 100% of the value of the home established by a VA appraisal
· Refinance out of ARMs or other mortgage like conventional & FHA loans
· VA jumbo refinance loans are available but proceed with caution
· No monthly mortgage insurance unlike most mortgages without 20% equity.
By: Josh Klenda
Posts Tagged ‘Credit Scores’
The Advantages and Disadvantages of Refinancing Loans
April 18th, 2010
Refinancing loans is merely a process of paying existing loans with brand new loan plans that have rates of lower interest. It is possible, however, to negotiate your plan in order to obtain the greatest borrowing rate?
First and foremost, it begins with sturdy credit scores. This can be achieved by constantly paying bills on time, keeping low loan balances by around 30% from your actual limit and cutting back from borrowing.
Additionally, by making use of your home equity when it comes to refinancing current loans, you can gain two important advantages. 1) Since your home is your collateral, you can get bigger loans, and 2) your fees of interest can be tax deductible.
So, which one of these kinds of refinancing need to be considered?
A home equity line of credit is a kind of revolving credit, where credit limits happen to be the greatest amount that you can borrow at once. A closed-end loan for a second mortgage is a loan where funding is received the minute a loan contract is signed. The loan is repaid by defining a particular set amount within fixed time periods.
Better decisions can be made on what kind of credit to opt for by initially collecting all the data that is available to you: the conditions and terms of the line of credit option, is derived from annual percentage rates, as well as the associated costs for securing prepayment penalties and loans, if these exist. Then, compare the information with the annual rate percentage of your second mortgage, along with other charges that are present within your financial documents.
Title searches and insurance are meant to make sure that you get marketable titles. You might find yourself getting price breaks by deciding to purchase combined owner and lender policies or reissue policies.
Lastly, take current mortgage refinancing into consideration. If the existing rate of interest on your mortgage is a minimum of two percentage points higher, compared to prevailing rates of the market, you should make use of refinancing loans. This happens to be the acceptable margin of safety when balancing refinancing mortgage costs versus your savings.
Several financing experts have determined that around three up to five years would be considered an acceptable time length to live within a house prior to realizing important savings. It would not make a lot of sense to realize this with only just two years of living in your home; plus, you may find it more difficult to find lenders who are willing to work for you.
Keep in mind that the safest bet for you to consider prior to deciding on refinancing would be to do financial research.
By: Bufen Hill