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 ‘Current Market’
1st and 2nd Mortgage Refinance Loan – Why Refinance Both Mortgages?
April 23rd, 2010
The hassle of making two monthly mortgage payments has prompted many homeowners to consider refinancing their 1st and 2nd mortgages into one loan. While combining both loans into one mortgage is convenient, and may save you money, homeowners should carefully weigh the risks and advantages before choosing to refinance their mortgages.
Benefits Associated with Combining 1st and 2nd Mortgages
Aside from consolidating your mortgages and making one monthly payment, a mortgage consolidation may lower your monthly payments to mortgage lenders. If you acquired your 1st or 2nd mortgage before home loan rates began to decline, you are likely paying an interest rate that is at least two points above current market rates. If so, a refinancing will greatly benefit you. By refinancing both mortgages with a low interest rate, you may save hundreds on your monthly mortgage payment.
Furthermore, if you accepted a 1st and 2nd mortgage with an adjustable mortgage rate, refinancing both loans at a fixed rate may benefit you in the long run. Even if your current rates are low, these rates are not guaranteed to remain low. As market trends fluctuated, your adjustable rate mortgages are free to rise. Higher mortgage rates will cause your mortgage payment to climb considerably. Refinancing both mortgages with a fixed rate will ensure that your mortgage remains predictable.
Disadvantages to Refinancing 1st and 2nd Mortgage
Before choosing to refinance your mortgages, it is imperative to consider the drawbacks of combining both mortgages. To begin, refinancing a mortgage involves the same procedures as applying for the initial mortgage. Thus, you are required to pay closing costs and fees. In this case, refinancing is best for those who plan to live in their homes for a long time.
If your credit score has dropped considerably within recent years, lenders may not approve you for a low rate refinancing. By refinancing and consolidating both mortgages, be prepared to pay a higher interest rate. Before accepting an offer, carefully compare the savings.
Moreover, refinancing your two mortgages may result in you paying private mortgage insurance (PMI). PMI is required for home loans with less than 20% equity. To avoid paying private mortgage insurance, homeowners may consider refinancing both mortgages separately, as opposed to consolidating both mortgage loans.
By: Carrie Reeder
Home Equity Loans vs. Refinance Loans
January 30th, 2010
To many people, there seems to be very little difference between a home equity loan and a refinance loan. However, there are some differences. You will find that a home equity loan, whether it looks like a more traditional loan or a line of credit, offers a little more flexibility. However, the refinance loan usually offers a lower interest rate. Both types of loans, however, have interest that is tax deductible. Make sure you understand the features of both before making a decision between home equity loans vs. refinance loans.
Home Equity Loans
Included in home equity loans are home equity lines of credit. You can decide how much of your equity you want to use as collateral for the loan. Equity is how much you “own” of your home. It is the difference between how much you have left to pay on your home loan and how much your home is worth on the current market. You can borrow part of your equity, or you can borrow all of it. Additionally, you can choose how you want to receive the money: as a lump sum or as a line of credit. This can allow you some flexibility. If you choose the line of credit, you don’t have to borrow up to the limit, but more is available if you need it.
Refinance Loans
While some of the accumulated equity in your home is used in a refinance loan, the loan is really meant to establish new terms for your loan. The entire mortgage is redone, and some of the accumulated equity you have can be added in for a “cash out,” where you take cash and your home is refinanced for an amount that is higher over all. You have no decision as to how to take your loan. It is lump sum. It is applied to “pay off” your “old” mortgage, and the remainder, the “cash out” portion, is given to you. Usually, it is possible to spread the terms out over a longer period of time than a home equity loan, and you usually end up with a lower interest rate.
Home Equity Loans vs. Refinance Loans: Which is Best For You?
You have to decide which would work best for you. If your purpose is to mainly to fix an interest rate or change the loan term to something longer or shorter, and maybe get a little extra cash to pay some bills or take a vacation, the home refinance loan may work best for you. However, if you are looking for flexibility, and you are not sure exactly how much you need, a home equity loan, in the form of a line of credit, might be your best option. Do your research, though, and shop around for a loan that suits your specific needs.
By: L. Sampson