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 ‘Mortgage Payments’
The Housing Rescue Bill and the FHA Refinance Loan
April 27th, 2010
On October 1, 2008, new FHA Refinance Loan Guidelines will go into effect as part of The Housing and Economic Recovery Act of 2008. This new FHA Mortgage program is designed to help thousands of homeowners who are at risk of foreclosure in their current conventional or sub-prime home loans.
The details of The “HOPE for Homeowners Act of 2008″ are as follows:
1. Eligible Borrowers
Only owner-occupants who are unable to afford their mortgage payments are eligible for the program. No investors or investor properties will qualify. Homeowners must certify, under penalty of law, that they have not intentionally defaulted on their loan to qualify for the program and must have a mortgage debt-to-income ratio greater than 31% as of March 1, 2008. Lenders must document and verify borrowers’ income with the IRS.
2. Home Equity & Appreciation Sharing
In order to avoid a windfall to the borrower created by the new 90% loan-to-value FHA-insured mortgage, the borrower must share the newly-created equity and future appreciation equally with FHA. This obligation will continue until the borrower sells the home or refinances the FHA-insured mortgage. Moreover, the homeowner’s access to the newly created equity will be phased-in over a 5 year period.
The borrower agrees to repay the following share of any home equity appreciation with the FHA when the home is sold or refinanced again;
A. 100% of any equity earned is paid to the government FHA if the home sells or the borrower refinances within 1 year.
B. 90% of any equity earned is paid to the FHA if the home sells or the borrower refinances within 2 years.
C. 80% of any positive equity earned is paid to the FHA if the home sells or the borrower refinances within 3 years.
D. 70% of any positive equity earned is paid to the FHA if the home sells or the borrower refinances within 4 years.
E. 60% of any positive equity earned is paid to the FHA if the home sells or the borrower refinances within 5 years.
F. 50% of any positive equity earned is paid to the FHA if the home sells or the borrower refinances after 5 years.
Note: The FHA requires a 3% Exit Fee of the Mortgage Principal Balance when the borrower sells or refinances the home again.
3. Other Requirements
Existing Subordinate Liens
Before participating in this program, all subordinate liens (such as second loans, home equity loans, etc.) must be extinguished. This will have to be done through negotiation with the first lien holder.
Mortgage Insurance and Other Fees
The Up Front FHA Mortgage Insurance Premium that is required on all FHA Refinance Loans will change as part The Housing and Economic Recovery Act of 2008. The Monthly MI Rates have also been updated. The following FHA MI rates will begin on October 1, 2008 and will be effective for 12 months;
FHA Up Front MIP – Required on all FHA Loans (Can be financed into loan amount).
1.75% – Normal FHA 203(b) Refinance 1.5% – FHA Streamlined Refinance 3.0% – FHASecure (Refinance for high risk borrowers who are already delinquent on current mortgage)
Monthly MI – Multiply the loan amount by the figure below and then divide by 12. The result is your Monthly Mortgage Insurance.
30 Year Note 0.55% – Refinance greater than 90% of the home’s LTV. 0.50% – Refinance less than or equal to 90% of the home’s LTV.
15 Year Note 0.25% – Refinance greater than 90% of the home’s LTV. Monthly MI is not required on an 15 Year FHA Refinance Loan with an LTV of 90% or less.
The FHA Refinance Loan Process
Each new loan will be originated and underwritten on a case-by-case basis. To get approved, your income statements, bank accounts, credit scores and work history will be examined. A new appraisal must be performed on your home to determine its current value.
If it doesn’t have positive equity, then you must contact your current lender and negotiate with them to reduce (write down) your current mortgage to 90% of its current appraised value. If your current lender agrees to the write down, then you will be able to proceed with the FHA refinance.
By: Spencer Llewellyn
Loan Modifications, Mortgage Refinance Loans and the Foreclosure Crisis
April 21st, 2010
The foreclosure crisis continues to ravage our economy with more lost jobs, reduced home equity from plummeting home sales and delinquent mortgage payments. Unfortunately, many people have the ability to make their home loan payment on time but they jumped on the loan modification train with their neighbors and stopped paying their mortgage in hopes of reducing their monthly payments through renegotiations with the loss and mitigation department of their mortgage servicing company.
Clearly, there is nothing wrong with renegotiating your mortgage for a lower payment. Essentially that is what mortgage refinancing is all about. Loan modifications are different, because the terms are not fair for the bank because they take a loss. Banks who hold the mortgage note loose income from pre-payment penalties, loss of interest and in some cases loss of principal. The argument could be made that each time a bank agrees to a loan modification jobs are lost, because revenue is lost and expenses must be cut. However the reality is that we are in a serious financial crisis and if the mortgage lenders did not restructure their customers mortgage loans, then the banks would crash quickly as the liquidity problems would worsen.
Millions of homeowners are seeking mortgage refinancing or loan modifications in an effort to save their house or make their monthly payments more affordable. Unfortunately for mortgage brokers and lenders, mortgage refinance closings have slowed to very uncomfortable rate.
According to CFB Branch loan officer, Jeff Moran, most refinance loans are taking seven to eight weeks. Imagine owning a mortgage company that had to fund four staff payrolls to fund a loan. Imagine paying underwriters, processors and loan officers to work on home loans that likely would not actually close. The mortgage business has seen brighter days. Credit restrictions have tightened lending guidelines to the level that very few borrowers qualify for a mortgage. Moran continued, “FHA mortgage loans have been the only lending product we can count on and fortunately the government loans will consider the borrower’s compensating factors for approvals.”
On the other hand loan modification companies have never has more business. With millions of have homeowners on the brink of foreclosure, people are lining up to help people modify their loan terms. With the recent $850 billion dollars from the Financial Bail-Out package, you can bet that loan modifications will only increase in 2009. Once we get past the foreclosure crisis most financial critics agree that home refinancing will resume back on its normal course.
Mortgage lenders have started to negotiate with borrowers who are not delinquent with their mortgage. In most cases, you don’t have to be 60 days late to get a loan modification any more. The Chinese define crisis as danger and opportunity. Hopefully Americans will utilize this foreclosure crisis and seize the opportunity to move forward as a stronger more pragmatic country.
By: Bryan Dornan