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 ‘Interest Rate Reduction’
Interest Rate On Refinance Home Loans Explained
March 10th, 2010
When considering refinancing you have to know exactly if the loan exchange will serve the purpose that you have in mind. Thus, in order to know whether you’ll be saving money on the overall life of the loan or if your monthly payments will decrease, you need to compare the loan terms of the loan to be refinanced with the new loan conditions.
Refinance Home Loans
Basically, mortgage refinancing consists on replacing an existing home loan with another one, using the money obtained from the new loan to cancel the previous outstanding loan. This is done for different purposes: for repaying the mortgage sooner, for lowering the monthly payments by extending the repayment period or by obtaining a lower rate, for saving money by shortening the loan term or reducing the interest rate, etc.
Whatever the purpose of the new loan is, there are certain variables that will determine whether the loan will suit its purpose. These variables are: The interest rate, the loan schedule, the loan amount, and the amount of the monthly payments. All these variables are related and mostly determined by the risk involved in the transaction.
Interest Rate On Refinance Home Loans
However, the interest rate is probably the most important variable as all the others can be defined or determined through it. Actually, the interest rate is a measure of the risk involved in the transaction and the rest of the variables are usually established according to the risk that lending to a particular borrower represents.
The interest rate charged on home loans is usually the lowest in the loan market only beaten perhaps by certain subsidized loan where the government or certain non-profit organizations cover for some part of the interest rate so as to provide to the borrower with a significant interest rate reduction.
A refinance home loan can feature a lower rate or a higher rate than the outstanding home loan. This will depend on the current and past credit score of the applicant and on the current and past market conditions that determine both loans. If the previous loan was taken under worse market conditions and with a worse credit score, chances are that you’ll be able to obtain a better interest rate on your refinance home loan.
So, when considering refinancing, you’ll need to pay special attention to the interest rate charged for the new loan and compare it with the outstanding mortgage loan so as to see if you are actually saving money by refinancing. Even if you are refinancing for other reasons, you should pay attention to the interest rate issue to be able to know how much refinancing will actually cost you so you can budget efficiently according to these new figures.
By: Mary Wise